Jairam's wrong on GSPC PDF Print E-mail
Friday, 06 May 2016 03:45
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Just the DDW field in KG Basin has 1,060 bcf of gas versus the 9 bcf Ramesh says all GSPC’s KG fields have


Did Narendra Modi, as Gujarat chief minister, shoot off his mouth when he spoke of the state-owned GSPC discovering 20 trillion cubic feet (tcf) of gas in the KG Basin or was it more than that? The Congress party which is agitating on the matter in the Rajya Sabha—two articles written by party MP Jairam Ramesh in The Hindu contain most of the charges—is insinuating large-scale corruption as well.


So, in the first article, enticingly called ‘The new KG scam’—to ensure readers see a link with the CAG report on Reliance!—Ramesh describes the Rs 19,700 crore spent on exploration and production as ‘evidently used to farm out contracts to dubious entities’. In another place, while asking for an ‘independent judicial inquiry’, he cites the instance of Tuff Drilling which got a contract from GSPC and describes its promoter as someone who ‘had an apparel business’, talks of how it ‘was only incorporated in 2006 after Mr Modi’s boast’, of how ‘it received an order in 2010 from GSPC worth several hundred crore … to supply sophisticated deep water platform rigs’—the promoter who ‘is also alleged to have been an active supporter of the Vibrant Gujarat investment summits’, Jairam concludes, ‘is now bankrupt’.

While that certainly looks like the proverbial smoking gun, what Ramesh forgets to mention is that Tuff Drilling had partners who had the experience and that, in any case, since it didn’t deliver, its contract was cancelled—this is there in the CAG report that Ramesh cites—not a paisa paid and its bank guarantee of R15.5 crore encashed.

But even if Modi can’t be indicted for corruption, even if by insinuation, there is a far more serious charge of squandering of public resources. You can dismiss as fanciful Jairam’s arguments that GSPC is technically insolvent or that it had government cover—‘a current Deputy Governor of the Reserve Bank of India served as a director on the board of GSPC … and even chaired its audit committees’—since the company has not defaulted on its payment, but why was

R19,700 crore spent when, as Jairam says, ‘by 2010, GSPC admitted that there was no or very little gas in the KG Basin’? A chart in the article (reproduced in the graphic) gives details of GSPC’s reserves ‘as estimated by the globally renowned reservoir appraiser, Gaffney, Cline & Associates, and disclosed in GSPC’s annual reports’.

So, in 2005, Jairam puts the estimated GSPC reserves from the KG Basin at around 3,900 million cubic meters, going down to 3,000 the next year, around 2,400 after that, all the way down to a mere 250 million cubic meters or so in 2015. To put this in the billion/trillion cubic feet language that such reserves are normally talked of, that’s 138 bcf in 2005 going down to 9 bcf in 2015—that’s where the GSPC-admitting-it-had-very-little-gas is coming from. Contrast this with the 14-23 tcf that Gujarat industry minister Saurabh Patel said there was in the KG Basin fields. Someone’s clearly got it very wrong.

The data, as Jairam says, is indeed in various GSPC annual reports over the years. The 2005-06 annual report talks of ‘proved reserves’ of gas being 3,909 million cubic meters and the 2014-15 one gives a number of 258 million cubic meters. But with a caveat, these are reserves for fields/blocks that are in commercial production—the law requires oil cos to report reserves for fields/blocks in production. This does not include data on blocks being explored like KG, though Jairam assumes the reserves in the annual report pertain to the KG Basin.

In the case of the 17 sq km Deen Dayal West (DDW) field in the 530 sq km KG Basin block operated by GSPC, the company had filed its field development plan saying (based on the Gaffney, Cline & Associates certification) the field had 2,986 bcf of gas in place, of which 1,612 bcf was recoverable. When the Directorate General of Hydrocarbons (DGH) examined the data and ran its models, it felt it was more likely that the reserves were 2,000 bcf, around half of which was recoverable over a period of 20 years.

The KG Basin block had several fields (see graphic) and GSPC has been giving information on what it finds to the DGH as and when the exercise is over. So, apart from DDW, it has submitted a Declaration of Commerciality (DoC) based on 25 wells in the Six Discoveries to the DGH—the DGH has reviewed this. According to Gaffney, the total reserves in the entire block are likely to range from 8,992 bcf to 23,104 bcf and, of this, the recoverable portion ranges from 4,855 bcf to 11,848 bcf. This is where the Modi/Saurabh Patel numbers are coming from.

Even so, it is odd that the company’s annual report should not talk about such big discoveries especially when close to R20,000 crore has been spent in trying to take the gas out of them. While various reports mention a big discovery, the 2009-10 one is more specific since by then the DGH had given its approval to the DDW field development plan. ‘As of March 31, 2010’, the report says, ‘our net entitlement … were 644.8 BCF, 947.8 BCF and 1,089 BCF’—the three figures are the low/medium/high estimates and this is based on the share that GSPC owns in the KG Basin block. And, in 2014-15, the annual report says ‘a total of 8.48 TCF of in-place hydrocarbon volumes have been established by your Company as the operator for the six Discoveries’

Getting the gas out, it is true, is not going to be easy and GSPC is already way behind target. Indeed, other companies such as RIL have also had huge difficulties and even roped in BP Plc as a partner to get its expertise. While Modi has tried to get BP to offer GSPC some technical help, this may not do the trick and, most likely, an oil major with experience in drilling ‘tight’ and high-pressure-high-temperature wells will have to be inducted. But that is not the burden of the Congress and Jairam Ramesh’s song. And the data from GCA and the subsequent ratification of a part of this by the DGH—if GCA’s numbers are right, this is a gold-mine—prove the accusations are baseless.


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