CAG hauls up ONGC for hiring a 2nd rig from Reliance

The Comptroller and Auditor General of India has hauled up state-owned explorer ONGC for hiring a drilling rig from Reliance Industries without bidding and for no pressing reason.

CAG, in a report tabled in Parliament today, said Oil and Natural Gas Corporation hired rig 'Actinia' from RIL for six months in 2009 for Rs 146.71 crore (Rs 1.46 billion) saying it needed urgently drill three wells but its actual usage indicated the hiring was ‘not necessary’.

This is the second time that CAG has pulled up ONGC for hiring a rig from RIL.

It had in a September 2012 report criticised ONGC for hiring deepsea drilling rig Dhirubhai Deepwater KG-1 in May 2009 without calling for competitive bids and on untenable grounds.

Both the hirings happened when R S Sharma was the Chairman and Managing Director of the state-owned firm.

CAG in the latest report said, "ONGC hired rig 'Actinia' from RIL for six months on assignment basis in deviation of standard tendering procedure citing requirement to drill at three locations."

"Actual deployment of the rig indicated that hiring of the rig was not necessary for drilling at any of the three identified locations.

The entire expenditure (of) Rs 146.71 crore (Rs 1.46 billion) on hiring of the rig from February 2009 to July 2009 was, thus, avoidable," it said.

ONGC had hired Actinia from RIL at a day rate or $190,000 to drill three wells. But CAG during the audit found that the rig was deployed at only one of the three locations that had been put as reason for hiring of the rig.

The other two locations were drilled by two different rigs.

Originally, RIL had hired rig Actinia from Transocean Offshore International Venture Ltd for 1,020 day period ending July 1, 2009.

It in November 2008 approached ONGC for sub-letting the rig for a period up to July 1, 2009.

ONGC took up the offer reasoning that it needs to drill three wells.

"Rig Actinia was hired without calling for competitive bids.

"Hiring of rig was not justified as the rig was not necessary for drilling any of the three identified locations," CAG aid.

Also, the rig idled from February 16, 2009 to February 22, 2009 for want of material supply.

"During this period, standby day rate with crew ws payable for the rig, which resulted in unfruitful expenditure of Rs 4.64 crore (Rs 46.4 million) ," CAG added.

Last year CAG stated that ONGC had in May 2009 hired DDKG-1 from RIL for four years ending July 2013 without calling for competitive bids at an operating day rate of $ 495,000 for first 180 days and at USD 510,000 from 181st day onwards.

This rig was in fact hired by RIL from Deepwater Pacific-1 Inc in October 2007 for a period of five years beginning July 2009.