CAG raps Panna-Mukta operators over rig deals

The operators of Panna-Mukta-Tapti (PMT) oilfields have paid unnecessarily high rates to rig service contractors, the audit and accounts department under the Comptroller and Auditor General of India (CAG) has found.

The operating consortium of the PMT oilfield has RIL (30%), British Gas (30%) and ONGC (40%) as partners.

The auditor has raised objections over the consortium’s failure to advertise for inviting companies to pre-qualify for the third-party drilling services contracts valued at more than $3 million.
The consortium awarded 17 such contracts during 2003-04 and 2004-05.

The CAG has said in its report that such discretionary awarding of contracts without inviting pre-qualification bids was detrimental to competition.

The audit department has also said that the consortium procured more than required inventory for operations at the fields by not accounting for reusable items in the inventory stock. The excess pile of inventory might have adversely impacted the profits of the government from these fields, it said in the report.

The consortium has been asked to prepare a report that specifically mentions reusable material deployed in the field.

According to the report, the consortium agreed to pay higher amount to rig and drilling service contractors after these contracts were extended beyond their expiry period of 20 months. According to the auditor, the market rates were found to be lower than the rate paid by the consortium owners.
The audit department has also alleged that the consortium paid higher than the market rate for awarding oil country tubular goods contracts.

Extension of these contracts was made in 2006 for an additional $14.5 million at the same rate at which they were previously awarded. However, according to the auditor, the market rate at the time of re-warding these contracts was lower.

The report has also raised objection for not awarding the execution of new revised plan of development (NRPOD) project to the lowest bidding company, J Ray McDermott, which had quoted a price of $300.77 million.

The NRPOD project was planned to maintain the plateau of South Tapti and development of the Mid-Tapti field. By not awarding the contract to the lowest bidder, the consortium incurred extra expenditure of $28.41 million, the report said.