Yesterday, five people were arrested by the Delhi police for allegedly leaking classified documents from the petroleum ministry to corporates and energy consultants. In addition to the five arrests, twenty-five people have been detained, among them an executive from Reliance Industries. The documents are said to include internal communication on arbitration cases against Reliance. In our July 2014 issue, Krishn Kaushik, while reporting for his story on how the Oil and Natural Gas Corporation was being undermined, found that a similar leaks from ONGC in 1999 benefited Reliance Industries in their bid for the KG D6 block.
The year 1999 was a significant one for India’s oil and gas industry. In January, the government threw the country’s hydrocarbon reserves open to private exploration for the first time. Under the New Exploration Licensing Policy, national and international state and private companies were invited to compete for the rights to drill at sites around the country. In NELP’s inaugural auction, 48 blocks, each potentially worth billions of dollars, were up for grabs. The process attracted 21 bidders, including India’s largest company by revenue, the state-owned exploration and production giant Oil and Natural Gas Corporation Limited.
For ONGC, which produced nine-tenths of the nation’s hydrocarbon fuels, this was new terrain. In the past, the corporation and another public sector company, Oil India Limited, could freely select oil and gas blocks to lease from the government; private and international players were only allowed to operate in the exploration and production, or “upstream,” sector by partnering with one of them. This had worked well through the late 1980s, but in the following decade India’s energy demands dramatically overshot domestic production. NELP was meant to narrow the gap by fostering more aggressive exploration.
In mid August, about a week before the deadline to submit bids, a team of ONGC experts from Dehradun arrived in Delhi. In the past, the group helped the government evaluate proposals from private corporations keen to set up joint ventures with the national oil companies. To ensure fair play in the era of open competition, the experts had been relieved from government service and sent back to ONGC. The corporation’s director of exploration convinced the then chairman and managing director, BC Bora, that these men would be best suited to assess the sites on offer and prepare ONGC’s tenders.
At ONGC’s offices near Connaught Place, the experts gave a block-by-block presentation to Bora and his board. Only a handful of other people were in the room. When the team finished, Bora asked them: if they could have just one site of all those on offer, which would it be? “Which is your number one?” he said, according to a board member at the time, who was present at the meeting. They named a particular deep-water block in the Krishna Godavari Basin, thirty kilometres off the coast of Andhra Pradesh—KG DWN 98/3, now commonly known as KG D6.
Bora, a mannerly engineer with greying temples who previously served as the head of OIL, told his team to double the minimum work programme for the block—the least amount of surveying and drilling that ONGC would guarantee to carry out. This is the main criterion on which bids are evaluated. According to the board member I met, the experts replied that doubling the programme was unnecessary. “We have been evaluating bids for the government,” they said. “Nobody makes such aggressive bids.” They had already drafted a very ambitious proposal, they assured Bora. The director of finance was also concerned that doubling the work programme would cost too much.
“There was a lot of halla,” the former board member recalled. Then Bora said, “OK, make it 50 percent more—one and a half times the work programme.” With these instructions, the experts went back to Dehradun, where the final bids were typed out.
When the blocks were awarded by the government’s Directorate General of Hydrocarbons the following January, Bora was taken aback, the board member said. ONGC had lost KG D6, outbid by not only one, but two firms—Reliance Industries, which won the block, and Cairn Energy, a European upstream company.
ONGC’s director of exploration thought that something “fishy” was going on, the board member said. “I feel it got leaked out—our numbers got leaked out and somebody was snooping around,” he recalled the director telling him. The director suspected that the bid was opened beforehand and given to Reliance. “In the DGH’s office itself the bid was opened and given to them,” he speculated to the board member. “They took back their bid, and came back with a new envelope.”
“Of course this was unconfirmed,” the board member told me. He wondered if there was “one dark horse” in ONGC who spied for the competition. Were the private companies that cunning? He said almost admiringly, “These people are capable.”
An excerpt from “Rigged,” published in The Caravan’s July 2014 issue. Read the story in full here.
Krishn Kaushik is a staff writer at The Caravan.