Hydrocarbon Production Sharing Contracts

190 Pages·2016·1.69 MB·English

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HYDROCARBON PRODUCTION SHARING
CONTRACTS

MINISTRY OF PETROLEUM AND NATURAL GAS

PUBLIC ACCOUNTS COMMITTEE
(2015-16)

FORTY-SEVENTH REPORT

SIXTEENTH LOK SABHA

LOK SABHA SECRETARIAT
NEW DELHI
1
PAC NO. 2079

F O R T Y - S E V E N T H R E P O R T

PUBLIC ACCOUNTS COMMITTEE
(2015-16)

(SIXTEENTH LOK SABHA)

HYDROCARBON PRODUCTION

SHARING CONTRACTS

MINISTRY OF PETROLEUM AND NATURAL GAS

Presented to Lok Sabha on: 28.04.2016

Laid in Rajya Sabha on:28.04.2016

L O K S A B H A S E C R E T A R I A T
N E W D E L H I

April, 2016 / Vaisakha 1938 (Saka)

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CONTENTS

PAGES

Composition of the Public Accounts Committee (2015-16)
Composition of the Public Accounts Committee (2014-15)
Composition of the Public Accounts Committee (2013-14)
Composition of the Public Accounts Committee (2012-13)
Composition of the Public Accounts Committee (2011-12)
Composition of Sub-Committee-VIII(Hydrocarbon Production Sharing Contracts)
of the Public Accounts Committee (2015-16)
Introduction
REPORT
PART- I
I BACKGROUND 1-2
II INTRODUCTORY 2-16

A. Investment Multiple (IM)/ Pre-Tax Investment Multiple (PTIM) 16-26
FINDINGS RELATING TO KG-DWN-98/3 21
B. Non-relinquishment of the contract area 26-37
C. Deficiencies in pre-qualification process 37-38
D. Irregular selection of AFP 38-41
E. Proposal for Declaration of Commerciality (DoC) 41-47
F. Policy on Testing Requirements for discoveries in NELP blocks 47-48
G. Viability of Optimized Field Development Plan (OFDP) 48-52
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III GRANT OF CONCESSIONS AGAINST CONTRACTUAL TERMS 52-72
A. Contract for Engineering, Procurement, Installation and Construction of 52-62
offshore facilities.

B. Contract for chartering FPSO 62-65

C. Increased cost for expediting deliveries and early mobilization of 65-69
commissioning team and extension of date of first production of oil and gas

D. Fabrication and installation of living quarters 70-72

IV IRREGULAR PAYMENTS 72-79
A. Construction of OT INR 22.7 million to M/s Larsen & Toubro (L&T) Ltd 72-74

B. Payment of INR 1110.90 million as compensation on Free Issue Material 74-77
C. 77-79
Classification of Start-up and Production Bonuses as part of recoverable
costs
V AWARD OF CONTRACT 79-85
A. Piece-meal hiring of drilling rig “Deepwater Frontier” from M/s. Transocean – 79-83
US$ 88.77 million.
B. 83-85
Bonus paid for time saved during rig movement

PANNA-MUKTA AND MID & SOUTH TAPTI FIELDS 86-120
VI INTRODUCTION 86
VII DEVELOPMENT OF PANNA-MUKTA AND TAPTI FIELDS: 86-87
VIII ISSUES AND HIGHLIGHTS OF AUDIT FINDINGS 87-91
A. REPORT NO. 19 OF 2011-12 87-88
B. REPORT NO. 24 OF 2014 88-91
IX ISSUES UNDER ARBITRATION 91-96
A. Report No.19 of 2011-12 91-92
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B. Report No. 24 of 2014. 92-96
X NON-SIGNING OF CRUDE OIL SALES AGREEMENT 96-98
XI 99-101
COST RECOVERY OF UNCONSUMED PRODUCTION INVENTORY
XII 101-103
AWARD OF CONTRACT FOR INSTALLATION OF PLATFORMS
XIII PETROLEUM OPERATIONS 103-108
A. Delay in Water Injection (WI) project in Panna field resulting in 103-108
declining production
XIV SALE OF GAS BY ONGC AND TWO JV PARTNERS (RIL AND BGEPIL) IN 108-118
CONTRAVENTION TO MOPNG'S DIRECTIVES.
A. Loss of US$ 9.92 million due to sale of gas in contravention to MoPNG 110-115
directives and GSPA
B. 115-118
Loss of government revenue of US$ 0.52 million due to sale of Panna-
Mukta gas in contravention to PSC
XV DELAY IN NON-FIXATION OF TRANSPORTATION LOSSES OF 118-120
CONDENSATE
RJ-ON-90/1 BLOCK 121-137
XVI INTRODUCTION 121
XVII 121
OBJECTIVE
XVIII AUDIT REVIEW 122
XIX EXPLORATION AND APPRAISAL ACTIVITIES 122-126
A. Delayed Relinquishment of Area 122-123
B. Extension of Appraisal Period 124-125
C. Discoveries made during/after Exploration Period 125-126
XX COMPLIANCE ISSUES 126-131
A. Delay in submission of Work Programme and Budget (WP&B) 126-128
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B. Short Payment of Profit Petroleum to GoI-Adjustment of Shipping Cost 128-130
beyond delivery point
C. Delay in approval of Optimizing Concept 130-131
XXI NON-LIFTING OF CRUDE OIL BY NOMINATED GOI REFINERIES 131-133
XXII NON-FIXATION OF PRICE OF RJ CRUDE DESPITE PRODUCTION FROM 133-136
THE CONTRACT AREA SINCE AUGUST 2009
XXIII AWARD OF CONTRACT BEYOND PSC PROVISIONS 136-137
PART - II
OBSERVATIONS/RECOMMENDATIONS 138-173
APPENDICES
I Minutes of the Sitting of Public Accounts Committee (2015-16) on 26th
April, 2016*
II Minutes of the Sitting of Sub-Committee-VIII on 25th April, 2016*
III Minutes*

* Will be appended at the time of printing.
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COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE
(2015-16)

Prof. K.V. Thomas - Chairperson

MEMBERS

LOK SABHA
2. Shri S.S. Ahluwalia
3. Shri Sudip Bandyopadhyay
4. Shri Ranjit Singh Brahmpura
5. Shri Nishikant Dubey

6. Shri Gajanan Kirtikar
7. Shri Bhartruhari Mahtab
8. Shri Ramesh Pokhriyal "Nishank"

9. Shri Neiphiu Rio
10. Shri Dushyant Singh
11. Shri Janardan Singh Sigriwal

12. Dr. Kirit Somaiya
13. Shri Anurag Singh Thakur
14. Shri Shivkumar Udasi

15. Dr. P. Venugopal
RAJYA SABHA

16. Shri Naresh Agrawal

17. Shri Satyavrat Chaturvedi

18. Shri Anil Madhav Dave
19. Shri Vijay Goel

20. Shri Bhubaneswar Kalita
21. Shri Shantaram Naik
22. Shri Sukhendu Sekhar Roy

SECRETARIAT

1. Shri A.K. Singh - Additional Secretary
2. Shri T. Jayakumar - Director

3. Smt. Bharti S. Tuteja - Deputy Secretary

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COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE
(2014-15)
Prof. K.V. Thomas - Chairperson

MEMBERS

LOK SABHA

2. Shri S.S. Ahluwalia
3. Shri Sudip Bandyopadhyay
4. Shri Ranjit Singh Brahmpura
5. Shri Nishikant Dubey
6. Shri Gajanan Kirtikar
7. Shri Bhartruhari Mahtab
8. Shri Ramesh Pokhriyal "Nishank"
9. Shri Neiphiu Rio
10. Shri Rajiv Pratap Rudy
11. Shri Janardan Singh Sigriwal
12. Shri Jayant Sinha
13. Dr. Kirit Somaiya
14. Shri Anurag Thakur
15†. Vacant

RAJYA SABHA

16. Shri Satyavrat Chaturvedi
17. Shri Vijay Goel

18. Dr. Satyanarayan Jatiya

19. Shri Bhubaneswar Kalita

20. Shri Shantaram Naik

21. Shri Sukhendu Sekhar Roy

22. Shri Ramchandra Prasad Singh

† Vacant vice Dr. M. Thambidurai who has been chosen as Hon'ble Deputy Speaker, Lok Sabha and has
since resigned from the membership of the Committee.

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COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE
(2014-15)
Prof. K.V. Thomas - Chairperson

MEMBERS

LOK SABHA

2. Shri S.S. Ahluwalia
3. Shri Sudip Bandyopadhyay
4. Shri Ranjit Singh Brahmpura
5. Shri Nishikant Dubey
6. Shri Gajanan Kirtikar
7. Shri Bhartruhari Mahtab
8. Shri Ramesh Pokhriyal "Nishank"
9. Shri Neiphiu Rio
10‡. Vacant
11. Shri Janardan Singh Sigriwal
12§. Vacant
13. Dr. Kirit Somaiya
14. Shri Anurag Thakur
15**. Vacant

RAJYA SABHA

16. Shri Satyavrat Chaturvedi
17. Shri Vijay Goel

18. Dr. Satyanarayan Jatiya

19. Shri Bhubaneswar Kalita

20. Shri Shantaram Naik

21. Shri Sukhendu Sekhar Roy

22. Shri Ramchandra Prasad Singh

‡ Vacant vice Shri Rajiv Pratap Rudy who has been appointed as Minister w.e.f. 9th November, 2014.
§ Vacant vice Shri Jayant Sinha who has been appointed as Minister w.e.f. 9th November, 2014.
** Vacant vice Dr. M. Thambidurai who has been chosen as Hon'ble Deputy Speaker, Lok Sabha and has
since resigned from the membership of the Committee.

iv
COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE
(2014-15)
Prof. K.V. Thomas - Chairperson

MEMBERS

LOK SABHA

2. Shri S.S. Ahluwalia
3. Shri Sudip Bandyopadhyay
4. Shri Ranjit Singh Brahmpura
5. Shri Nishikant Dubey
6. Shri Gajanan Kirtikar
7. Shri Bhartruhari Mahtab
8. Shri Ramesh Pokhriyal "Nishank"
9. Shri Neiphiu Rio
10††. Shri Dushyant Singh
11. Shri Janardan Singh Sigriwal
12‡‡. Shri Shiv Kumar Udasi
13. Dr. Kirit Somaiya
14. Shri Anurag Thakur
15§§. Dr. P. Venugopal

RAJYA SABHA

16. Shri Satyavrat Chaturvedi
17. Shri Vijay Goel
18. Dr. Satyanarayan Jatiya
19. Shri Bhubaneswar Kalita
20. Shri Shantaram Naik
21. Shri Sukhendu Sekhar Roy
22. Shri Ramchandra Prasad Singh

†† Elected w.e.f. 3rd December, 2014 vice Shri Rajiv Pratap Rudy who has been appointed as Minister
w.e.f. 9th November, 2014.
‡‡ ‡‡ Elected w.e.f. 3rd December, 2014 vice Shri Jayant Sinha who has been appointed as Minister
w.e.f. 9th November, 2014.
§§ §§ Elected w.e.f. 3rd December, 2014 vice Dr. M. Thambidurai who has been chosen as Hon'ble
Deputy Speaker, Lok Sabha and has since resigned from the membership of the Committee.

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