Guest Column Retrofit: Wading through oil exploration woes

Director General Hydrocarbons VK Sibal’s office used to be in the same building that I used to work in – HT House on KG Marg – in the Capital. Sibal has had a tumultuous five years in the Directorate. During his jousts with ONGC Chairman Subir Raha, he was always accommodative. I would just give him a shout and turn up at his office upstairs to get the latest ‘juice’ on the joust with Raha. Incidentally, Raha, too, was equally media savvy and was always available to me at short notice. At HT, we wrote many oil sector stories, which proved to be best of breed at the time. One has followed Sibal’s pronouncements with great interest ever since. Sibal is in your face, with a touch of bluster and a devil-may-care attitude. Lately though, he seems to have gone off the boil.

No, wait, not for shooting his mouth off, but for saying some rather strange and bizarre things, which don’t add up. Despite his bluster, I always found him to be very balanced earlier. These days, however, his sense of proportion is definitely amiss. Is the pressure of getting an extension getting to him? Is the stress of being constantly in the public glare showing? He loves being in the news, as he showed us during the famed spat with Raha. But this time media seems to have turned on him and this is exasperating him. The other day I saw him giving an interview to NDTV, where he said that the Ambani gas opera has cost India greater participation and investment from global E&P majors in its oil exploration programme. Then I read somewhere that he fears for his life from Reliance ADAG. Wow.

Actually his problems really began when Anil Ambani waded into him for allegedly aiding and abetting the increase in Reliance Industries’ capital expenditure programme for the KG D6 gas field. Then came the slam dunk from Pioneer. In a page 1 expose, the paper blew the lid on how Sibal’s daughters enjoyed RIL’s hospitality in Mumbai. The worst part was that Sibal in his rejoinder to the Pioneer more or less confirmed everything stated in the report.

This is when I thought that the normally taciturn Sibal, despite his penchant for bombast, was beginning to feel that he was behind the eighth ball. Moreover, it was clear that he wanted to retain his high profile job. On Monday, The Times of India reported – After ADAG, Sibal now accuses CVC of witch hunt. With the Pioneer story creating consternation in Delhi’s seamy political and bureaucratic underbelly, the CVC decided to launch a probe into the allegations. But the TOI story said, “Exploration regulator VK Sibal has accused the CVC of flouting norms by not concluding in time a probe into allegations raised against him two years back and reviving it now to deny him an extension of service.” At the core of the current Sibal controversy is his retirement, which looms large on the radar on October 31. Even during the fusillade which erupted when Sibal went after Raha in the triangular Mani Shankar Aiyar vs Subir Raha vs Vinod Sibal battle, Sibal was nonchalant despite Raha trying to put him on the mat constantly. Now, Sibal is being targeted in the public and media’s crosshairs in a deliberate and blatant manner. Which tells you that when the government or a section of the government decides to back somebody, he can get away with blue murder. This time all bets are off as Sibal is fighting for his life. Strangely, his minister Murli Deora has gone underground.

So, Sibal’s flanks are exposed. Anyway, back to the CVC witch hunt. On October 1, CVC asked CBI to conduct field verification of source information that Sibal had a nexus with RIL and took favours in return for approving an artificially inflated capex for the company’s gas field. Interestingly, Sibal in his letter to Murli Deora, as reported by TOI, has pointed out that the allegations were first leveled in August 2007. He questioned as to why the then GAIL chief vigilance officer Arvind Jadhav (who is now the Chairman of Air India and has problems of his own these days) has not been held responsible for not taking action. Feeble repartee, it appears, given the ecosystem that weighs heavily against him.

On Tuesday, TOI again reported that the NELP VIII auction has gone abegging with nearly half of the 70 concessions on offer failing to find a suitor. The story was a damning indictment of India’s exploration programme. It said, “The Government’s eighth round of exploration acreage auction has crashed with nearly half of the 70 concessions on offer failing to attract any suitor. The Oil Ministry put up a brave front, saying it was not so bad in percentage terms and blamed the tepid response to global slowdown, while some industry players said it was the Ministry’s interference with contracts of previous rounds that had put off investors.”

Then late on Tuesday night, while writing this piece, I was trawling the Internet and I found this story on The Times of India’s website with a TNN byline. The story interestingly said, “The response to the Government’s eighth round of exploration acreage auction fares well when compared to similar biddings globally, though it does not exactly shine in terms of past Indian experience. As per the final results, out of 80 blocks bids for which had been invited, 44 blocks received bid or nearly 55 per cent response.” So, I began to wonder which of the two stories was right. The broadside on Tuesday morning or the attempt to paper over it on Tuesday night at 11.54 pm on the same paper’s website.

The reality is that India’s oil exploration programmes have been an abject failure, with only two companies – ONGC and RIL – dominating the show all these years. An overwhelming majority of the acreage rests with these two companies. Despite Cairn and RIL’s stunning successes in oil and gas exploration in Barmer and KG Basin, no real global E&P major has ever come forward. More on that a little later.

I remember telling Oil Minister Mani Shankar Aiyar embarking on one of the NELP roadshows that the true litmus test of the programme’s success or failure would be when the E&P big boys start beating down his doors. Each time, the roadshows have promised much, but delivered little. No real E&P foreign investment has come into this country. The recent controversy over the production sharing contract between RIL and the Government and legal challenge posed to it by ADAG firm RNRL, which won its case in the Bombay High Court, has not helped matters. With ADAG firm RNRL raising Cain over the Ministry’s interference with terms of marketing and pricing freedom in production sharing contracts, the fat was truly in the fire. So, all is definitely not kosher with exploration in this country, a paltry sum of foreign investment has come in the last seven rounds and only two big Indian players have dominated. So, where is the question of the Ambani feud derailing the auction process, as Sibal claimed on NDTV the other day. Which brings me to preparation. Do our telly journos actually do any homework before going on air? Do they study facts and figures? Do they care?

The Oil Ministry’s defence after the NELP VIII fiasco was typical, “Compared with data from similar major auctions held by countries with much more prospectivity than India, the response is one of the best globally in times of the global credit crunch. For example, Algeria received bids for only four out of the 15 blocks it had offered, Uruguay got response for two blocks out of 11 on offer, Indonesia five out of 16, Brazil 54 out of 130, and Norway 35 out of 67.” Now for some serious reporting. Indianpetro.com on October 11 posted this vital piece of news on its site, “India’s energy sector, which had gained in investors’ confidence over the last few years, seems to have suffered a major setback, considering US’ major oil groups have decided to stay out of the eighth round of New Exploration Licensing Policy (NELP). Energy firms, like Exxon Mobil, ConocoPhillips, and Chevron, which were once considered to be the main targets of NELP-VIII promoters, are known to have stayed away from the bidding process, this year. “Yes, certain companies, which were expected to be the main bidders this time around, have not shown much interest in the 70 oil and gas blocks, which have been put up for bidding, but it’ll be premature to say that the response has not been good”, said some highly placed Petroleum Ministry officials privy to the development.

“But, considering that the Directorate General of Hydrocarbons (DGH) is already talking of fresh round of roadshows as soon as NELP-VIII is concluded, one can concur the lukewarm response with respect to the bidding, thus far. Even earlier, it was apprehended that the E&P investors will be low in confidence due to the global credit crunch, but the mood was exacerbated after the terrorist attacks in Mumbai. Post that, the legal spat between the feuding Ambani brothers, Mukesh and Anil, over the price of gas supplies from Reliance Industries’ D6 block in the Krishna Godavari basin hit the investors’ confidence further. Therefore, the mild response should come as no surprise to the Government of India (GoI). The final result for the NELP-VIII will be known on Monday, when the bidding process closes. In the meantime, the Indian E&P sector is pinning its hopes on the European energy firms, owing to Cairn India’s spectacular finds in the Barmer block, RJ-ON-90/1. The expectation is reinforced by the fact, that the European representatives seemed enthusiastic throughout the bidding round, which took place at Landmark hotel in London. The gathering was addressed by Additional Secretary S Sundareshan and presentations were made by the Confederation of Indian Industry (CII), ONGC, RIL, Cairn India, BG India and BP India regarding India’s business climate and investment.”

End result is sadly a big cipher notwithstanding Sibal’s tall claims. The idea was to garner $3-4 billion investment from NELP-VIII. The Oil Ministry claims that a total committed investment in NELP rounds for exploration is around $10 billion, with $5.3 billion of this having been made in exploration. It will be interesting to find out the sum total of foreign investment in these figures. It is minuscule. After conducting roadshows in Mumbai, Houston, Calgary, London, Perth and Brisbane, they have nothing to show. Curiously, Oil Secretary RS Pandey told reporters as far back as August 9 that the Ambani legal battle would not impact investment whatsoever in NELP round 8.

Wonder whether anyone can see through the dense fog in the Oil Ministry. At least speak in one voice, if nothing else. Media unfortunately has begun to take stenography seriously, hope someone starts asking questions soon. Meanwhile, the clock is ticking for

(Sandeep Bamzai is a well-known journalist, who started his career as a stringer with The Statesman in Kolkata in 1984. He has held senior editorial positions in some of the biggest media houses in three different cities - Kolkata, Mumbai and New Delhi. In late 2008, he joined three old friends to launch a start-up – Sportzpower Network – which combines his two passions of business and sport. Familiar with all four media – print, television, Internet and radio, Bamzai is the author of three different books on cricket and Kashmir.

The views expressed here are of the writer’s and not those of the editors and publisher of exchange4media.com.)

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