At a time when crude oil prices plunged to seven-year low, India’s flagship explorer ONGC has met losses to the tune of Rs 8512.27 crore during FY11 and FY14 due to poor rig management programmes, delay in tendering and higher degree of inefficiency, said Comptroller and Auditor General (CAG) of India. In addition, the national auditor, in its report titled utilisation of rigs in ONGC, also said that due to idling of rigs the government-run explorer suffered production deferment of at least Rs 5,117 crore of oil and gas.
These findings raise serious concerns about the operations of ONGC, which is slow in ramping up output and now faces lower crude oil and gas prices to implement its capex programmes.
CAG, which audited ONGC rigs between FY11 and FY14, found that the company failed to make proper estimates of requirement of rigs and their timings. This had led to rigs remaining idle and out of cycle for prolonged periods and increase in drilling costs.
“Delay in hiring process led to loss of 391 rig months during 2010-14, which rendered the compant unable to drill planned locations…Rs 517 crore was charged off on account of rigs out of cycle during 2010-14. While a fraction of non productive time (NPT) was on account of non-controllable factors like weather, the bulk of idling time valuing Rs 6,418 crore was well within the control of the company and could have been addressed through better planning and coordination,” CAG said in its report place in Parliament on Wednesday.
Drilling activities are key to hydrocarbon production and reserve accretion and constitute the single most significant operation of an upstream oil exploration company. ONGC’s non-productive time or idling time of rigs ranged between 19 and 23% over 2010-14. Moreover, four out of six owned offshore rigs outlived their economic usable life of thirty years.
CAG also brings to limelight the safety lapses in drilling and testing operations. It utilised even after one anchor of its rig Sagar Vijay had snapped. As a result, another anchor of the rig snapped, which caused drifting of the rig from its location. Consequently, the well had to be closed and abandoned. As a result, expenditure of Rs 1,577.27 crore incurred by ONGC on drilling of the original location and drilling of a relief well by using another rig proved avoidable.
“The insurer did not honour the claim of ONGC on the ground that the latter had not followed recognised safe operating practice,” the report said.
The Maharatna did not adhere to the repair schedule for dry dock management and major lay-up repairs of jack-up rigs which was against an efficient operational practice. Failure on the part of the company led to a situation wherein rigs were being operated with outdated/obsolete equipment, CAG pointed out in its report.
The national auditor suggested ONGC to ensure that the plans (five year plan, annual plan, rig requirement plan, rig deployment plan) are complete and consistent with each other and are complied with. The situation where one out of every three wells drilled is un-planned needs to be corrected, it said, adding that the controllable non-productive time of past periods should not be loaded to future rig requirement plans and efforts to be taken to reduce such non-productive time.