Oilfield auction

The Centre’s move to auction off 12 small oilfields in Assam has sparked protests across the State, pushing the BJP-led alliance government in Dispur on the backfoot. Alliance partner AGP has gone public with its opposition to the auction move, complaining that it was not kept in the loop before the decision was taken. This is the problem with unilateral Central decisions with which states have to will-nilly fall in line. Was the BJP leadership informed of the Modi government’s move beforehand, and did it keep its state unit enlightened? It seems not, so the BJP leadership has only itself to blame for bracketing a sensitive state like Assam with other states — considering that the saffron party has been congratulating itself non-stop for forming a government in Assam for the first time, thereby establishing a bridgehead for the party in the Northeast. Now the BJP leadership will have to get its regiol partner AGP on board if 67 small oilfields, including the 12 from Assam, are to go under the hammer on July 15. Petroleum minister Dharmendra Pradhan has said that these small fields ‘require micro-level magement and specific technologies’, which makes it ‘uttractive’ for public sector oil giants ONGC an OIL to invest in. Hence, despite being discovered 20-30 years back, these oilfields have been lying undeveloped with these two PSUs. These are estimated to contain oil and gas deposits of 86 MMT amounting to around Rs 70,000 crore of reserves. If this is mere chicken feed for the OIL and ONGC, then it is high time such large entities should come under the scanner for the way they go about their work.

There have been allegations galore about the comparatively low employee productivity of such giant PSUs vis-a-vis the money the government spends upon them to help maintain their lavish ways. If their main functions of surveying, drilling, production and transportation are not keeping within cost limits, surely some restructuring and belt tightening is called for. In fact, some oilfields in Upper Assam have been virtually privatized for this reason. But that in turn has caused other problems. Private players with their myopic focus on maximizing profit margins, have been criticized for ruthlessly sucking oilfields dry and damaging the surrounding environment. After they are through with an oilfield, for all practical purposes, the site is destroyed beyond repair. Private players are also frequently accused of avoiding protective operations like oil well servicing to cut expenses.  But since they squeeze more out of their lean and mean manpower, private players are in favor — with the Central government now estimating that around Rs 4,000 crore would be needed to fully exploit the 67 small oilfields. It is amusing to see the Centre now going on the defensive about protests in Assam, trying to justify that the oilfields here are ‘unproductive’. If that is true, then no private player will bid for such oilfields and blow a hole in its sacrosanct balance sheet! As for specific technologies and machinery, surely the OIL and ONGC are no strangers to it in their operations in Gujarat, Bombay High and other places. The Congress in Assam has meanwhile argued that other new entrants in oil exploration like GAIL, IOCL or HPCL along with State level PSUs like Assam Gas Company and Assam Hydrocarbon Limited can form joint ventures to operate small oilfields. However, that would require the Centre to keep the Assam government in the loop and explore all options with these public entities. The question is — will the Modi government have enough patience for that, given its anxiety to net private capital through bids under the New Exploration Licensing Policy (NELP)? Last but not the least, the suspicion has been growing that the ONGC and OIL authorities are losing patience with their Assam assets, in a State where bandh and extortion culture is rampant. Though insiders point to pilferage and corruption in other state assets too, the negativities in Assam require sober introspection — for it has been a major disincentive in the State’s overall industrialization and efforts to attract capital.