Oil Sector May See a Major Scam

Religious Clash Damages Oil Production

Religious Clash Damages Oil Production
Religious Clash Damages Oil Production | Source
Jayapal Reddy Was Shunted Due To Pressure from Reliance
Jayapal Reddy Was Shunted Due To Pressure from Reliance | Source

Big Oil Scam Not Far Away To Surface

Corruption in Oil Sector

There is a view that the government of India should desist from micromanaging the oil sector. There are several allegations that all the national parties of India – particularly the ruling Congress and the principal opposition party BJP collude in promoting the interests of Reliance Industries, the largest company in India. Internationally accepted best practices are not followed in India in oil and natural gas discovery and allocation. Private companies are first allowed to recover their costs and then share the revenue with the government. This facilitates corruption to the tune of billions of dollars. Congress and BJP are equally guilty in this daylight robbery of public resources.

Jayapal Reddy Was Shunted Due To Pressure from Reliance

Take for example the bidding for oil exploration. The bidding has failed to attract important oil producers and exploration companies abroad. The government should reduce its role and market forces to operate in production, distribution and price of petroleum products. The finance minister P Chidambaram has expressed his view for rational pricing of petroleum products. He feels that the continuous price hike of crude oil is damaging growth prospects in India. The former oil minister Jayapal Reddy stated that oil block auction will be conducted only after a friendlier policy is formulated. What the minister meant was a friendly policy for the investors and at the same time facilitating the government to monitor share of revenue and pricing. But the minister was shifted from his post immediately in the Cabinet shuffle. Rumours are floating that because of the pressure exercised by Reliance Industries, the minister was shifted to an innocuous post.

Shale Gas – The Future Fuel

There is a rush for shale gas in USA. Oil India Ltd and IOC have jointly acquired 30% stake in Carrizo Oil’s field for an investment of Rs.428 crore. The combine is the 3rd Indian entity to get a share of US shale gas field. Shale gas is referred by many knowledgeable people as the fuel of the future. In India, the Indian oil companies have been earning a profit but still not reducing the oil prices. At times when they revise the prices, the drop is very small and insignificant. Oil companies are planning for staggered, frequent revisions in order to avoid steep increases later. The government of India not only hikes oil prices steeply periodically but also has capped subsidized LPG cylinders. This will anger the middle class and the ruling party is sure to be defeated in the next parliamentary ousting.

Attack On Oil Installations Planned?

The government hiked diesel prices by a record Rs.5 per litre recently. Diesel car owners started protesting. I fail to understand why rich people should protest at a hike of Rs.5 per litre. To add to the confusion, oil refineries in Mumbai have been threatened for terrorist attack. Islamic fundamentalists feel that if oil refineries are targeted, it will affect Hindus and Hinduism. So, in the name of Lord Allah and Prophet Mohammed, the terrorists are preparing for such an attack.

Projects Are Shelved Due To Protest

The borrowings of oil marketing companies have gone up. For various projects, the oil companies need big money which will come only through borrowings. But there are hitches in executing the projects even after borrowing huge sums from banks and financial institutions. For example there is a big opposition from the fishermen against laying of a 42-inch crude oil pipeline. The pipeline is being laid by Chennai Petroleum Corporation. The fishermen feel that their lives and profession will suffer if the oil pipeline was laid. Before the hike in diesel price, the government was sustaining a loss of Rs.19.26 per litre due to subsidy.

ONGC’s Investments Have Gone Waste

Oil exploration companies like ONGC Videsh are facing many problems abroad. In Sudan the problem is due to religious militancy by the Islamic fundamentalists in North Sudan who view ONGC Videsh as a Hindu company opposed to Prophet Mohammed. USA also wants to deny ONGC oilfields due to its Iranian connections. There was a decline of 8% in India’s international oil assets in 2010-11. Gas production also fell in the same period by 5.7%. ONGC Videsh paid a hefty price of $2.1 billion for acquiring Imperial Energy. Now an enquiry has been ordered into the deal. ONGC has provided a sum of $408 million for the poor performance of Imperial Energy’s assets. CAG has questioned the deal with Imperial Energy.

Religious Clash Damages Oil Production

BPCL’s oil block in Mozambique’s Rovuma basin has 60 trillion cubic feet of recoverable gas. Oil India has earmarked a sum of Rs.6000 crore for its overseas acquisitions. ONGC’s $500 million investment in Syria is not producing any oil. ONGC’s investment of $3 billion in South Sudan has gone waste due to wrangling between North and South Sudan. The clash is mainly a religious clash between Islamic fundamentalists in North and Christians in South. ONGC’s investment of $40 million in Farsi offshore block in Iran has also gone waste as no oil is produced now.

Big Oil Scam Not Far Away To Surface

What is the reason for such huge investments draining away? There are risks in oil exploration industry and one has to factor this into consideration. But looking at huge scams that erupt in India involving the ruling Congress Party and its ministers, one smells something foul. Could it be that the politicians are looting money in billions of dollars through ONGC? The CAG report has only touched the tip of the iceberg. If full information comes, it could be the largest scandal in India yet. Many skeletons in the cupboard will roll. Even the principal opposition party BJP may be embarrassed by the findings.

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