The Central Vigilance Commission ( CVC) has asked Oil and Natural Gas Corp ( ONGC) and its directors to individually explain why the state firm had planned to hire rigs without tendering, taking a harsh view of the company’s plan that was dumped after media reports highlighted it.
ONGC had planned to hire nine rigs through nomination, apparently to save time in the hiring process, in 2015, but didn’t go ahead after ET reported this. Oil rigs are large structures capable of drilling wells and extracting oil and natural gas, and come for a few lakh dollars a day on rent. A rig is the biggest cost component in producing oil or gas and a sub-optimal decision in hiring rigs can upset the production cost for an oil company.
Following the report, the CVC sought explanation from ONGC. “The CVC has taken a harsh view of the matter,” said a source with direct knowledge of the matter. “ONGC’s initial explanation has cut no ice with the CVC. The company said it was just a plan that remained unexecuted. But CVC wants to know why ONGC drew such a plan in the first place.” This back and forth of CVC queries and ONGC’s explanation has consumed almost two years.
The CVC has now sought explanation from each functional director who was part of the executive procurement committee that had decided in favour of hiring rigs through nomination in 2015. The oil ministry is also part of this investigation and has sought more information from ONGC on this. ONGC did not respond to ET’s email query till the time of going to press.
State oil firms are supposed to use the nomination route only in exceptional circumstances. The plan to bypass tendering attracted attention because in 2015 rigs were easily and cheaply available as many companies abandoned or deferred drilling because oil prices had crashed in 2014. As a result, surplus rigs were available cheap.
For Indian projects too, tenders for rigs in the past three years have attracted interests from several rig companies from across the globe and at rates that are substantially lower than the previous contracts. There is a cut-throat competition among rig owners to grab contracts.
ONGC deploys dozens of rigs at any point in time on land and at sea. In 2017-18, it plans to make a capital spending of Rs 30,000 crore, most of which would go into its offshore projects off the eastern and western coast.