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Mandatory audit of oil and gas contracts put on hold

The petroleum ministry has decided not to make audit of all oil and gas contracts mandatory including production sharing contracts between public and private sector companies for the time being.

According to official sources, this was planned earlier to avoid unnecessary legal disputes with the explorer but even proposed to the law ministry.  

In a reply to the parliament, last month, the minister had even stated that it is right of the ministry  to carry out audit of all oil and gas contracts  as a public policy.

However,  the ministry has decided to make it a discretionary power  wherein  it has the right to exercise its right to carry out audit of all fields, Pre-NELP and NELP blocks as per the provisions made in Section 1.9 of the Accounting Procedure (AP) of the Production Sharing Contract (PSC).

But  provisions to make it a mandatory subject will require legal amendments both in the prevalent law and the contracts and therefore the proposal is kept on hold.

A production sharing contract is signed between a contractor and the Government for carrying out hydrocarbons exploration and production work.

Meanwhile,  the owing to shortage of petrol products in certain parts of the country, the ministry has directed  the oil marketing companies and railways  to draw up a short term and long term measures.  

As short term measures, official sources said that   stand alone refineries in affected states  of Bihar, Jammu and Kashmir, Andhra Pradesh, Chattishgarh  would meet the demand  through rationalization of movement of rakes.

Besides, the OMCs have finalized imports of petrol during July-August, 2014 period to meet the demand due to shortfall from own refineries. Diesel was procured extra from standalone refineries of Reliance, Essar Oil and Mangalore Refinery Petrochemical Limited to meet the demand.

Meanwhile, the public sector oil Companies have made significant efforts to diversify their crude oil supply sources from other regions as well. Indias crude oil import basket is continuously expanding over last few years, with increased imports from South American and African countries.

In addition to the efforts at geographical diversification of our import sources, efforts are being made to augment domestic production of oil and natural gas.

In order to develop alternate source of resources,  the government has awarded 33 blocks for exploration and exploitation of Coal Bed methane. The CBM resources are estimated to be of the order of 63 Trillion Cubic Feet (TCF).

Out of the 33 blocks, 30 blocks have been offered through International Competitive Bidding (ICB), 2 on nomination basis and 1 through Foreign Investment Promotion Board (FIPB) route.
The Shale gas potential in the country has been assessed based on the geo-scientific data gathered for conventional oil and gas over the years in different sedimentary basins by National Oil Companies and Private/Joint Venture Companies.

The preliminary study indicates that the potential of Shale gas exists in Cambay, Gondwana, Krishna-Godavari onland, Cauvery onland, Assam-Arakan and Indo-Gangetice sedimentary basins.


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