How India's oil sector is mired in controversies

The CBI search at V K Sibal's residence on Friday is likely to bring into the open a number of controversies that have surrounded the office of the directorate general of hydrocarbons (DGH) and the ministry of petroleum and natural gas in the two tenures of the UPA government.

The searches were a tipping point in allegations against Sibal, a former director general of hydrocarbons whose tenure started in 2004 under Mani Shankar Aiyar and ended during the ministership of Murli Deora in 2009.

Besides the GX Technology case that led to police cases against Sibal, six other government officials and a GXT employee, Sibal is facing the heat in another case involving Reliance Industries (RIL).

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The Central Bureau of Investigation (CBI) is conducting a preliminary inquiry based on the Comtroller and Auditor General's (CAG's) draft report on the issue of RIL being allowed to increase capital expenditure on its D6 block in the Krishna-Godavari (KG) basin.

The preliminary inquiry has been going on since 2009. "CBI has not found enough evidence to register a case in this matter yet," said a government official.

The Central Vigilance Commission (CVC) had also carried out an investigation into the functioning of DGH during Sibal's tenure and recommended a CBI probe.

Unlike the 2G spectrum scam, in which CBI has questioned officials in the department of telecommunications, no official of the ministry of petroleum and natural gas is facing any probe.

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Sibal started courting controversy from the beginning of his tenure, when he ran into a dispute with the late Subir Raha, the then chairman of Oil and Natural Gas Corporation.

He got support from Aiyar. Subsequently, he questioned Gujarat State Petroleum Corporation (GSPC) for announcing a big gas discovery in the KG basin.

"Whatever I said about them (ONGC and GSPC) has come true. GSPC said it has found 20 trillion cubic feet (tcf), but now that it has submitted its field development plan, it is not even 3 tcf," Sibal had told Business Standard in an interview in October 2009. GSPC is yet to start production because the volumes are too low for the field to be viable.

Sibal was accused of being an RIL man at the height of the fight between the Ambani brothers in 2009.

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Sibal's daughters used the biggest private sector petroleum company's hospitality in Mumbai, it was alleged.

"My daughters paid rent and utility charges for a flat they took on rent.

All this has been hyped to make their (Anil Ambani's) case stronger that the development plan for the D6 field, which was an addendum, has been approved for such favours," he said. His phone was switched off now.

Sibal himself equated the quantum of favours alleged with the kind of work he was handling.

"Do you think for approving Rs 50,000 crore (Rs 500 billion) someone will take a favour of having his daughters stay in a guest house? This baffles me," Sibal said in the interview. He was DGH then and in running for a second term.

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He even wrote to CVC in 2009 saying the guidelines were not being followed.

"Under the guidelines, any complaint that comes six months before the renewal of someone's tenure is not to be entertained.

I respect the process, but why has the system been compromised?"

He alleged that DGH had "became a pawn in the entire game" that was being played out between the two Ambani brothers since 2005 over gas from the KG basin.

In the GX case, CBI has charged Sibal with criminal conspiracy, cheating and giving undue favours to a private party.

It has alleged that in 2005, GX Technology got a contract for conducting a seismic survey on a nomination basis at an exorbitant cost, causing a huge financial loss to the government.

GX Technology is a subsidiary of the US-based ION group - a technology-focused siesmic solutions company.

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Though Sibal claimed that neither "Deora nor Aiyar ever asked" him for any favour for RIL or Cairn, the recent leaked draft report of CAG accuses the oil ministry and DGH of irregularly allowing the operator (RIL) of the D6 block to enter successive phases of exploration without the stipulated relinquishment of the area.

The government auditor said the estimated increase in the D6 capex from $2.4 billion to $8.7 billion between May 2004 and October 2006 was likely to have a 'significantly adverse impact on the government's financial take'.

CAG is also believed to have claimed that instead of a comprehensive development plan mandated under the production sharing contract (PSC), RIL submitted an initial development plan in May 2004 and followed it up with an addendum.

It questioned the reasonableness of costs incurred by RIL in respect of various high-value procurement activities during 2006-07 and 2007-08.

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In response to media reports on the draft CAG audit, RIL claimed it had fully complied with the requirements in the PSC "at all times in conducting petroleum operations" as a responsible operator.

CAG is also believed to have pulled up the ministry for granting an additional 1,708 sq km to Cairn India in the Rajasthan block.

It has also pointed out non-compliance with the PSC with regard to the appraisal programme and field development plans.

Due to the allegations and the inquiries, Sibal, who now works for his parent company, Oil India, told Business Standard in April this year that he regretted being proactive during his tenure at DGH. A change of mood from 2009 when he claimed, "This is the best job V K Sibal could have got. I have worked to my best and credit also goes to my team. Personally, I am not hurt. Even if I go, I am proud of the work I have done."