While the upstream regulator has enjoyed a relatively clean track record until the RIL-RNRL fracas, the downstream regulator is yet to get really started by Virat Bahri
Considering how our hydrocarbon reserves are a rare and precious national asset, the role of a strong regulatory body with the highest levels of competence and ethical standards becomes all the more paramount. And in the upstream sector, DGH was supposed to play that very role when the New Exploration Licence policy was instituted in 1993. The government had realized then that with the increasing role of the private sector, there was the “need to establish an agency that could effectively supervise the activities of all these companies in the national interest.” The DGH’s primary role includes reviewing exploration programmes for adequacy, technical and financial evaluation of development plans of commercial discoveries, review of reservoir performance at major fields, collection and preservation of data/samples related to discoveries (subsequently sharing with prospective bidders), advising the government on award of acreages, et al.
It was widely believed that DGH was playing a neutral and admirable role until the turn of this century, the years when late former ONGC Chairman Subir Raha was at the helm. Officials at ONGC continue to be critical of what they allege as unfair treatment meted out to them in favour of private operators like Reliance. They claim that ONGC had substantive discoveries around D6, but DGH took needlessly long time to approve the same. The fracas between Subir Raha and the ministry over the latter’s wish to appoint DGH director V. K. Sibal on the board is well known in business circles.
The killer blow really was the clear bias that Sibal showed towards RIL Chairman Mukesh Ambani during the gas row between the Ambani brothers. RIL had cited that its new price for gas was justified since the production cost had gone up from around $2.47 billion in 2004 to $8.8 billion by 2006. Anil Ambani’s RNRL contested the claim, also alleging that RIL was artificially keeping production low due to lower demand for the gas at the higher price of $4.2 per mbtu. V. K. Sibal sided openly with the elder brother and gave total approval to the increased investment estimates. Sibal even stated that the CAG had approved the capital expenditure in 2006, but CAG denied it. Media took up the cudgels on the issue of Sibal’s daughters being provided flats by RIL in Mumbai. The CVC decided, based on these parameters, that Sibal’s term should not be extended, even though the Ministry of Petroleum and Natural Gas had asked for the same. The data is critical, since the government enters into profit sharing agreements with exploration companies once they recover their costs; so a deliberately inflated cost would ultimately mean loss of money to the government.
Considering how our hydrocarbon reserves are a rare and precious national asset, the role of a strong regulatory body with the highest levels of competence and ethical standards becomes all the more paramount. And in the upstream sector, DGH was supposed to play that very role when the New Exploration Licence policy was instituted in 1993. The government had realized then that with the increasing role of the private sector, there was the “need to establish an agency that could effectively supervise the activities of all these companies in the national interest.” The DGH’s primary role includes reviewing exploration programmes for adequacy, technical and financial evaluation of development plans of commercial discoveries, review of reservoir performance at major fields, collection and preservation of data/samples related to discoveries (subsequently sharing with prospective bidders), advising the government on award of acreages, et al.
It was widely believed that DGH was playing a neutral and admirable role until the turn of this century, the years when late former ONGC Chairman Subir Raha was at the helm. Officials at ONGC continue to be critical of what they allege as unfair treatment meted out to them in favour of private operators like Reliance. They claim that ONGC had substantive discoveries around D6, but DGH took needlessly long time to approve the same. The fracas between Subir Raha and the ministry over the latter’s wish to appoint DGH director V. K. Sibal on the board is well known in business circles.
The killer blow really was the clear bias that Sibal showed towards RIL Chairman Mukesh Ambani during the gas row between the Ambani brothers. RIL had cited that its new price for gas was justified since the production cost had gone up from around $2.47 billion in 2004 to $8.8 billion by 2006. Anil Ambani’s RNRL contested the claim, also alleging that RIL was artificially keeping production low due to lower demand for the gas at the higher price of $4.2 per mbtu. V. K. Sibal sided openly with the elder brother and gave total approval to the increased investment estimates. Sibal even stated that the CAG had approved the capital expenditure in 2006, but CAG denied it. Media took up the cudgels on the issue of Sibal’s daughters being provided flats by RIL in Mumbai. The CVC decided, based on these parameters, that Sibal’s term should not be extended, even though the Ministry of Petroleum and Natural Gas had asked for the same. The data is critical, since the government enters into profit sharing agreements with exploration companies once they recover their costs; so a deliberately inflated cost would ultimately mean loss of money to the government.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
