The Comptroller and Auditor General has asked the Petroleum Ministry to review determination of the entire contract area as ‘discovery area' strictly in terms of production sharing contract (PSC).
It said the Petroleum Ministry should carefully review in-depth the award of 10 specific contracts awarded by Reliance on the basis of single financial bid.
Cairn Rajasthan Block
There were instances of non-compliance with regard to the PSC provisions for notification of potential commercial interest, appraisal programme, submission of field development plans etc.
Panna-Mukta-Tapti Joint Venture fields
The scrutiny was incomplete due to non-production of records. Based on limited records available, the Government incurred a substantial loss on account of royalty by failing to finalise the norms for post-well head costs of gas, and consequently gas well head prices.
Also faults norms for post well head costs issued in August 2007.
Recommendations
Functions discharged by Directorate-General of Hydrocarbons should be clearly demarcated and the functions of regulatory nature should be discharged by an autonomous body. CAG also favours revisiting the current profit sharing mechanism between the Government and contractor.
For future PSCs, it wants investment multiple linkage with the profit-sharing formula to be dropped. At present, the slabs for profit-sharing are so designed — more the capital incentive the project (lower investment multiple), the lesser GoI share of profit petroleum. Biddable profit sharing percentage should be a single percentage. This will reduce the incentive for skewed volume and timing of capital expenditure resulting in very low GoI share of profit petroleum.
High value procurement decisions above a specified limit should be subject to approval of management committee of the block.
Stipulated timelines and process in PSC for relinquishment of contract area should not be relaxed.