India's off-shore oil exploration runs into rough weather, charges of graft surface

An off-shore drill ship: zealous agents chasing lucrative commissionsAs India's off-shore oil exploration drive shifts into top gear, there are already strong indications that it has run into rough weather. Officials of the ministries of finance and petroleum were at loggerheads with each other last month over a $65 million (Rs 58 crore) deal involving a drill barge needed for oil exploration.Charges of graft and political meddling have began to surface. The CBI was conducting an inquiry against an Oil and Natural Gas Commission (ONGC) employee. And agents, especially of the fly-by-night variety, were out in strength to cash in on deals involving crores of rupees.The focus of the recent controversy was the drill barge - Mission Viking - which was being considered by the ONGC for charter hire. The Ministry of Finance had agreed in principle to let ONGC buy three such vessels, but the Petroleum Ministry evidently preferred to charter rather than make an outright purchase. Caught in the crossfire between the Finance Ministry and the Petroleum Ministry the Mission Viking deal appears to have fallen through, at least for the time being.The Mission Viking saga began in January 1981 when ONGC floated a global tender to purchase or charter hire a drill barge. Sixth Plan target estimates for production of oil by 1984-85, had been raised from 21.6 million tonnes to 30 million tonnes, with 20 million tonnes coming from off-shore production. The nine rigs operational in March 1961 had been increased to 41 by March this year and ONGC was contemplating purchase or charter hire of another two in the immediate future, with options to aquire another seven. Expenditure had grown from Rs 8.43 crore in 1959-60 to Rs 289.12 crore this year; ONGC was looking for loans in the international market. The response came only six months later when an Indian agent Prem Sawhney, representing Offshore Interland - a Bombay-based company offered - a drill ship for outright purchase for $55 million (Rs 49 crore).Difficult Decisions: The order placed with Lindenau Shipyard in West Germany had already been cleared by the Public Investment Board. With the sale of the drill ship which was to be delivered by April 1982, the West German shipyard also offered two other ships, the price was negotiable if both the ships were bought at the same time. The ONGC at that time did not seem to be interested in placing an order for a second ship.At about the same time an American-based New York company - Kulmer Inc - run by expatriate Indians jumped into the fray, offering Mission Viking on charter hire for a total price of S65 million, $10 million (Rs 9 crore) more than the outright purchase price quoted by the West German shipyard. The ONGC appeared to have its mind set on the latter offer. But the Finance Ministry who would have finally cleared the money to charter hire or purchase saw the entire deal in a different light. Said a Finance Ministry source, "Our exercise showed that it was more viable to purchase a drill barge than charter hire it." "Everybody suddenly seemed interested in pushing the Kulmer deal through, P.C. Sethi's office must have called at least three times a day, even some top officials seemed to be wanting to push the deal through,'" said a Finance Ministry official. Lovraj Kumar, secretary (petroleum), however, denied these allegations. Said Kumar: "I am keen on all projects, going through quickly. I need the equipment, charter hire or outright purchase." Indeed, in view of the country's mounting oil import bills there was, if anything, a premium on getting things moving.P.T. Venugopal the chairman of ONGC, had similar views. Said Venugopal: "Nonavailability of equipment at the right time can result in a great loss, which really cannot be measured in terms of money. If you drill and strike oil at a later date, the loss would have been tremendous, if you strike a dry well there would be no loss except for the time used for exploration."Additional Costs: The finance people, who look to the bottom line, didn't seem convinced. "Who was pushing whom and why, might well be difficult to establish, but there remained no doubt in our minds that people were interested in pushing it through," said a Finance Ministry source not wishing to be identified. Petroleum Ministry officials argue that any deal involving the purchase or hire of equipment has to be seen in a larger context. The purchase price of a drill ship does not take into account the additional cost of acquiring trained men and fitting proper equipment on the barge. Said a Petroleum Ministry official: "The Finance Ministry calculations show only a part of the story, their calculations are hypothetical and static." With that, the scenario for an inter-ministerial feud had been set.The Mission Viking controversy acquired a new twist towards the end of August when a report was submitted by a team of officials from the ONGC after a belated on-the-spot inspection of the barge. The experts' report showed a glaring anomaly. The drill barge - shown as a 1974 manufactured drill ship by Kulmer - was in fact a Second World War vintage vessel that had been used to ferry American troops. Further the working space available on board was inadequate and the title of the ship was still with its manufacturers - the Hanover Trust Company - and not Kulmer Inc, who were trying to float the barge as their own. It was obvious that Kulmer Inc had been unable to make the initial down payment of $ 6 million (Rs 5.4 crore) including the $ 1 million (Rs 90 lakh) bank guarantee demanded by ONGC.Said an ONGC source: "Under the most usual circumstances the payment for any ship negotiated starts with five equal instalments of 20 per cent deposits that begin with signing the contract, to the second stage of prefabrication, the third with the launching or floating leading to the delivery or acceptance ex-builder's yard and the final payment coinciding with the arrival of the ship at the purchaser's yard." Added the same source: "In shipping circles, commissions ranging from 1 per cent to 5 per cent are usual."Option: The report and the security deposit of a million dollars seemed to have pushed Kulmer out of the running, for the provisional letter of intent ran out on August 29. The ONGC expert group however, seemed to have left an option open, by adding that the boat if modified (they had not spelt out the modifications) could still be used.The deal had turned sour, say ONGC sources, because Kulmer could not raise enough funds to make good the first instalments. Kulmer however see it otherwise. Said H.V. Bhargava, vice-president of Kulmer: "If we could have spent a quarter of a million dollars on ferrying the ONGC group to Singapore, we could have also raised the money; they just did not want to give us an extension."Though, on the surface, the Mission Viking deal is buried - at least as far as the Finance Ministry is concerned - the agents haven't given up. The deal has taken another Kafkaesque turn with a new offer by another agent on behalf of the same barge. This time it is the imperial Engineering Company - a Bombay-based firm representing Management Audit and Control Services Limited (MACS) - a Panama-registered company that has come up with a new offer. A certain Leelawati representing Imperial claims that she can deliver Mission Viking for the outright purchase price of $ 38 million (Rs 34 crore) - a whopping $ 27 million (Rs 24 crore) less than the hire purchase price for the same barge. ONGC officials have become accustomed to such offers. Said an ONGC official: "Mission Viking had many agents - all zealous to cash in on fantastic commissions. Six such offers had come, each agent offering to sell or charter hire the same drill barge." The agent's knock is likely to grow louder as India intensifies its efforts to explore offshore oil.Published By: AtMigration Published On: Nov 8, 2013 11:38 IST--- ENDS ---

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India's off-shore oil exploration runs into rough weather, charges of graft surface

As India's off-shore oil exploration drive shifts into top gear, there are already strong indications that it has run into rough weather.

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