How CAG Caught ONGC for Over Stating Crude Oil Production

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According to latest report by CAG, ONGC shelled out Rs 18,787 crore in excess subsidy over 3 years as it ‘over- reported’ crude oil production by 12 per cent. This also resulted in extra payment of peformance related pay to its executives.

NEW DELHI, 9 AUGUST, 2016: In a report tabled in Parliament, the Comptroller and Auditor General of India (CAG) said ONGC ‘over-reported’ its crude oil production by 12 per cent through inclusion of items like condensate in the output.

Audit of the crude oil measurement and reporting system indicated that the company (ONGC) was reporting partially stabilized crude oil as its crude oil production. This led to over-reporting of crude production by including items other than crude oil, namely, off-gas, BS and W (impurities) and recoverable internal consumption, it said.

Basic sediment and water (BS and W) is a technical specification of certain impurities in crude oil. ONGC has also reported ‘condensate’ production inappropriately as crude oil production, though both products were identified distinct and treated differently by it.

Out of 132.17 million tons of crude oil production claimed by ONGC in five years from 2010-11 to 2014-15, as much as 12.1 per cent of over 6 million tons was over-reported. The over-reporting and incorrect reporting of crude oil production has presented an inaccurate picture of performance of the company on crude oil production and has led to the company sharing an additional subsidy burden of Rs 18,787.43 crore during 2012 and 2015, CAG said.

Besides, the over-reporting also resulted in over payment of performance related pay (PRP) to the company executives and staff. With ageing of fields (majority bring more than 30 years old), there has been an increase in water cut. This coupled with lack of adequate handling/processing facilities at the production installations resulted in higher proportion of BS&W and off gas in the crude oil.

The company, however, reported crude oil production without adjusting these elements fully, CAG said, adding that anomalies were noticed in the measurement practices. The auditor recommended that the loss/gain during transportation of crude oil through closed pipeline systems should be closely monitored to ensure that the variations are in normal range and identify abnormal loss/gain for corrective action.

Also, asset-specific standard operating procedure (SOPs) for measurement of crude oil production may be formulated and implemented. The company may report condensate as a separate stream as opined by international consultant, CAG added.


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