Public Undertaking Committee will take a call on the CAG report on GSPC: Saurabh Patel

Surabhi Richa Mishra New Delhi | Updated on January 20, 2018 Published on May 05, 2016

SAURABH PATEL, Gujarat’s Finance and Energy Minister

All investment and development decisions in the company are taken independently, says Gujarat Finance and Energy Minister

“The Comptroller & Auditor General’s report on Gujarat State Petroleum Corporation is being examined by the Public Undertaking Committee, which audits government companies…the Committee will submit its report to the State Assembly and we will take it seriously,” said Saurabh Patel, Gujarat’s Finance and Energy Minister. Adopting a pragmatic approach, Patel argues “Question is not being raised on whether GSPC’s east coast block has gas or not, but why now in-place reserves figures have been lowered. The CAG report has questioned the investment. If the people involved with giving clearances felt that the situation was different than what the company was proposing then they should have rejected the field development plan.” Patel, who was in Delhi, told BusinessLine in a interview that he doesn’t want to get into political bickering, but “it is evident the Congress wants to divert attention from the problems it is facing.” Excerpts:

The CAG has raised questions on the ₹2,000 crore spent on developing DeenDayal block, off the Andhra Pradesh coast, and adjacent to Reliance Industries operated KG-D6 block and ONGC’s 98/2 KG block. How do you read the CAG report? If PUC is the next step, then is the decision of the Committee binding on the government?

The CAG report was presented to the House, which then immediately was taken up by the PUC — which has representatives of all political parties. The PUC will take a final call. The report of PUC is treated with all seriousness.

CAG audit spoke about money, which was actually spent on the development plan of the field and not on other activities of GSPC.

Though a state-entity, GSPC is an independent company and does not have a single political director.

The company is headed without any political interference.

All investment and development calls are taken by the company independently. The decisions never come to the government — whether it is for capital investment or biddings for the block.

Krishna Godavari Basin looks to be a high pressure high temperature zone which makes exploration activity difficult.

Besides, at the east coast the work window is very narrow which leads to raising the costs slightly.

The GSPC explorations there have happened almost 5,000 metres below sea level, it is not a small distance. During the exploration and drilling, there are areas, where there might have been cost overruns.

All investment approvals for the field was done by the Board of Directors of the company and the Management Committee of the block — which overseas the operations of the block and has central government nominee as well — and the State Government. So, if there was no gas, the then government at the Centre — the UPA — could have stopped us.

So the company gets no sovereign support from the government? How do you explain that, it is a state-owned entity?

Except the initial equity, there is no contingent liability of the State Government for the loans, etc. Major revenue comes from GSPC’s gas trading. Also, some of the onshore field of Hajira are doing decently well.

GSPC is doing extremely well in setting up the gas grid in the State. We have substantially become a gas economy. Exploration is a big plus for the company, but it is a risky business. Look at Reliance Industries, ONGC, all have taken risks. We all jumped into east coast around the same time. And have they stuck to the earlier reserve figures. Yes, the production level has been lowered. It is a tough field. We have explained it to the CAG. The exploration success ratio of GSPC is much better than other companies. Success ratio varies from region to region. Generally, the average success ratio is about 32-35 per cent worldwide.

Reports have been coming that the State Government might want GSPC to exit upstream segment of oil and gas business? Are you thinking of getting a partner for the east coast block?

It requires a lot of money. If you look at gas as a whole, we started with Krishna Godavari as we wanted gas for our own State. It is not a question of going out. First we want to stabilise the current business. We are not entering into new areas. If we get experienced partners with technological knowhow, we won’t mind. But it is not a compulsion.

Given that gas prices are subdued and below $5 a unit (as is measured in million British thermal units), who will buy your east coast gas at about $6.6 a unit (at gross caloric value)?

This price has been decided by the Centre. Our State government companies can buy if they want to.

Right now, the prices are down. We will work on price when the time comes. We are trying to get clients in Andhra Pradesh. They don’t have a readymade market over there and liquefied natural gas (LNG) doesn’t go there.

The ready infrastructure of GSPC can be shared with your neighbours like ONGC in the east coast. Is there a thinking on it?

We will talk about it when the time comes. It is too early. There are different international agencies that have identified different quantum of gas for our block. International consultants like Gaffney, Cline & Associates and PetroTel have done independent reports and said there is gas.

It is only the Congress which is saying there is no gas. The reserve in-place announced by the then Chief Minister of Gujarat was 20 tcf for the entire block, which the consultant said would be 14 tcf on the lower side and around 20 tcf on the higher.

Recoverable reserves can vary from at least 50 per cent depending on what type of technology you are using and how successful you are. From Deen Dayal West the recoverable reserve is estimated to be around 1.43 tcf and remaining area around 11 tcf.

When will you start commercial production?

We are still trying to remove the bottlenecks we are facing. Once done we will start commercial production.

We sold a very small quantity to our own GSFC. We are working on it and trying to be successful. Making unnecessary political allegations won’t help.

We have started drilling more in Deen Dayal West (DDW) and results are good. We are undertaking fracking.

We are confident that the asset we have built will be utilised for the benefits of the country as a whole. DDW area is the only area we have explored.


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Published on May 05, 2016
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