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Performance
Commercial

Report No. 39 of 2015 - Performance Audit on Utilisation of Rigs in Oil and Natural Gas Corporation Limited, Union Government, Ministry of Petroleum and Natural Gas

Date on which Report Tabled:
Wed 09 Dec, 2015
Date of sending the report to Government
Government Type
Union
Union Department
Commercial
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Sector -

Overview

Drilling activities are key to hydrocarbon production and reserve accretion and constitute the single most significant operation of an upstream oil exploration company, both financially and operationally. A performance audit of utilisation of rigs of Oil and Natural Gas Corporation Limited (ONGC - hereinafter referred to as the Company) was conducted to obtain reasonable assurance that the Company had planned, hired, deployed, utilised and maintained rigs in an efficient and effective manner. The period from 2010-11 to 2013-14 has been covered in the report. Significant audit findings are listed below:

Planning of Rigs

The Rig Requirement Plan (RRP) which estimates the offshore rigs required by the Company in the forthcoming five-year period to meet its planned drilling activities was prepared essentially on the basis of past experience of rig utilisation. This included idling of rigs in the past, bulk of which was controllable by the Company, for example, 86.26 to 93.89 per cent of the total non-productive time (NPT) in Western Offshore, where maximum rigs were deployed, were on account of controllable factors. The RRPs, thus, had in-built inefficiency. No RRP was prepared for onland areas. The Company also prepares annual Rig Deployment Plans (RDPs) for deployment of rigs. The annual RDPs (2010-14) provided additional rig days compared to the RRPs and, thus, included a margin for higher degree of inefficiency. (Paragraphs 3.1 and 3.3)

There was no uniformity in the manner of preparation of annual RDPs among the Assets and Basins. Benchmark norms have been prescribed by the Company for a few onland Assets in 2011. However, even for these Assets, the benchmarks had not been uniformly adopted. It was noticed that plan for Ankleshwar, Ahmedabad and Mehsana Assets had days in excess of benchmark norms, 2011. Of the balance onland Assets (where benchmark norms had not been prescribed by the Company even by May 2015), some used the performance incentive norms, 2003 to prepare their RDPs while others had based their RDPs entirely on past performance. All offshore Assets and Basins prepared their RDPs based on past performance. Non-availability of norms and non-adherence to available norms led to distorted planning which resulted in un-reliable performance evaluation of the work centre and its employees.(Paragraph 3.3.1)

Acquisition and hiring of rigs

The Company needs to hire rigs in a timely manner to ensure seamless drilling operations. During 2010-14, 13 contacts out of 23 tenders selected in offshore areas and 8 out of 9 tenders in onland areas were not finalised within the prescribed time norm (delays of upto 508 days noticed). There were persistent delays at each stage of the tendering process, in initiation and finalisation of the indent, issue of NIT, finalisation of the tender and even in signing of the contract. Delays were also noticed in cases where the rigs already in use were being re-hired. Delay in hiring process led to loss of 391 rig months during 2010-14 which rendered the Company unable to drill planned locations. (Paragraphs 4.2 and 4.3)

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