Gujarat: GSPC’s KG-basin well comes under scrutiny

The CAG pulled up GSPC for an expenditure of Rs 478 crore that has been lying idle in an project.

Written by Avinash Nair | Gandhinagar | Published:April 1, 2017 6:11 am

The KG-basin project of the Gujarat State Petroleum Corporation Limited (GSPC) has once again come under the scrutiny of the Comptroller and Auditor General of India (CAG), which in its latest report pulled up the state-run firm for an expenditure of Rs 478 crore that has been lying idle in an offshore oil and gas exploration project due to “operational errors”.

In a report on “Public Sector Undertakings” tabled in the Gujarat Assembly Friday, the auditor questioned the expenditure incurred on KG-21 well that was drilled outside the drilling template. The drilling of offshore oil and gas wells is usually done using a drilling template, which consists of an open steel box with multiple holes, depending on the number of wells to be drilled.

The GSPC was awarded the KG block (KG-OSN-2001/3) for oil exploration in February 2003. During the exploration stage, five wells were drilled at a particular location between January 2005-October 2009.

“After drilling two wells (KG-08 and KG-17), a six-slot drilling template was installed (June 2006) on the conductors of the two drilled wells. This was done for undertaking further exploration activities. After the installation of the template, three more wells (KG-15, KG-28 and KG-21) were drilled. The fifth of the five wells (KG-21) was, however, drilled outside the template. The company was not aware of this fact at that stage,” stated the report.

Though gas was discovered in all the wells, the possibility of utilising the already drilled KG-21 well had become difficult. “This had resulted in expenditure worth Rs 478 crore incurred on the KG-21 discovery well remaining idle (December 2016),” the CAG observed. The GSPC told the CAG that zero visibility and diver error contributed to KG-21 well being drilled outside the template.

“The company found gas reserves in the KG-21 well in exploration stage, but may not be able to develop the same for commercial purpose. This was due to the KG-21 well being drilled outside the template and re-entry being difficult. As the KG-21 well could not be developed at the present due to operational errors as conceded by the management, the exploration cost of Rs 478 crore incurred on the same remained idle,” the CAG added.

In a similar report tabled in the Assembly in 2012, the CAG had rapped the GSPC for faulty investments and administrative decisions leading to a loss of Rs 7,000 crore. The report had criticised the then GSPC management for its deal with Canada-based Geo Global Resources Inc, which was its partner in the KG basin.

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