Black holes in white snow

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The petroleum ministry is facing yet another blow-out because its regulator is alleged to have favoured Reliance, says Shantanu Guha Ray

Messy links Did PMS Prasad, head of Reliance’s oil and gas division, help Sibal?
Messy links Did PMS Prasad, head of Reliance’s oil and gas division, help Sibal?
Photos: Hindu

WHEN THE Ministry of Petroleum and Natural Gas launched the much-hyped ninth edition of the New Exploration Licensing Policy (NELP) last month, one of the biggest worries of the Prime Minister’s Office (PMO) was that the offer should draw — this time at least — some of the global energy giants and remain free from controversy. Uppermost in the minds of the officials in the PMO was the ongoing slugfest between the world’s richest brothers, Mukesh and Anil Ambani, over the KG basin gas.

That no-holds-barred battle had led to a pile of dirty linen being washed in full public glare — and a lot of the backwash landed in the lap of the oil ministry.

Denial mode DGH head V K Sibal has denied that he sought favours from any oil and gas contractors
Denial mode DGH head V K Sibal has denied that he sought favours from any oil and gas contractors

But barely a month into the NELP announcement, the ministry is yet again in a firestorm. Two days after a news channel highlighted how top officials of the ministry had allegedly connived with a British-based company and guaranteed orders worth millions of dollars, highlyplaced sources in the Central Vigilance Commission (CVC) told TEHELKA that the CVC has again begun a probe against VK Sibal, director general in the Directorate General of Hydrocarbons (DGH). The probe seeks to confirm whether or not the oil regulator received favours from contractors, including Reliance Industries (RIL), in return for swift approvals of huge, unaudited capital expenditures relating to oil and gas explorations.

When the first investigation was launched by the CVC over two years ago, Sibal countered it by saying his dealings with RIL and, more specifically, the head of its petroleum division, PMS Prasad, was only on official issues. “I have to deal with him purely on official matters,” Sibal wrote to Maninder Singh, the oil and gas ministry’s vigilance director on December 14, 2007. Sibal is responsible for granting clearance to oil and gas exploration and production, a sector in which RIL is the biggest private sector player in India.

But this time, the charges seem more severe, as the allegation is that RIL helped Sibal organise a stay in Mumbai for his daughters, Priya and Sonia, and that the company furnished a flat acquired by his daughter in Mumbai with white goods. One of his daughters also stayed at an RIL guesthouse in July 2005.

RIL instantly denied both the allegations and the personal connect, saying Sibal’s daughter, Sonia, was offered accommodation only because her own flat was flooded during the unprecedented deluge that swamped Mumbai in 2005. “One of the unfortunate persons who was adversely affected as a result of this natural calamity in Mumbai was Sonia Sibal, the daughter of VK Sibal, the director general of DGH. In order to avoid disruption of her academic pursuits, she was provided temporary accommodation in one of the guesthouses of RIL,” said a company spokesperson. But RIL has been silent as to why Sibal’s daughters used the company’s hospitality for a period of months rather than days.

Sibal, currently in Australia for the NELP roadshow, pooh-poohed the allegations in a brief telephone conversation with TEHELKA and said he favoured no one during his five years as head of the regulatory body. “These are baseless charges and I am ready to reply to the CVC. I have not taken any favours from anyone, nor have I ever extended favours,” he said. He pointed out that this was a campaign aimed at jettisoning the oil ministry’s move to grant him a twoyear extension, since his five-year term ends on October 31 this year. “My conscience is clear and I have clarified everything in writing,” said Sibal, who has been under attack from Reliance Natural Resources Limited (RNRL), an Anil Ambani group company, for his alleged “hasty approval” of capital expenditure increase – from $2.47 billion to $8.8 billion – of the KG-D6 gas fields.

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A FEW HARSH FACTS

VK Sibal says CAG approved the increase in KG basin Capex

CAG retorts it had not evaluated the gas basin

Sibal says his daughters stayed at the RIL guest house for a few days

Evidence shows the daughters stayed for over four months

Sibal says he has no links with the owner of his rented home in Noida

A company floated by the wife of the owner got NELP projects

Sibal says he has no links with the owner of the building that houses the DGH offices

The owner’s company and other companies he represents got a number of NELP projects

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The Ministry of Petroleum and Natural Gas had initially backed Sibal, saying that independent experts had actually validated the cost escalation. But Sibal had put his foot in his mouth when he proclaimed that the Comptroller and Auditor General (CAG) had approved the capital expenditure of the KG-D6 fields. But when the CAG hit back, saying it had not evaluated the gas basin, both Sibal and the ministry maintained a stoic silence. In fact, ministry sources told TEHELKA that top officials of the CAG met on Tuesday, September 22, 2009, again to discuss the contentious issue.

But the charges refuse to die down. Sibal was named the head of DGH in 2004. Two years later, RIL revised all its capital expenditures by 400 percent.

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In Defence, From Sibal

The DG Hydrocarbons says there is an orchestrated campaign to malign him

THERE HAS BEEN criticism from various quarters on the so-called Gold-Plating of the development cost of the D6 field. This is the first deepwater development project in India. It is pertinent to mention here that the Dhirubhai gas discovery is the largest gas discovery in the world for the year 2002. In any other country, it would have been hailed and cherished. However, we are content with squabbling over this outstanding success.

The issue of high Capex was raised in Parliament in 2007 to which the Hon’ble Minister of Petroleum and Natural Gas Shri. Murli Deora submitted detailed clarifications.

A 2008 Goldman Sachs report clearly states that out of the 32 deep water projects developed in the world, D6 ranks amongst the lowest in terms of costs and amongst the fastest in terms of time from discovery to production. The DGH also got the cost validated by an Indian expert, Dr. P. Gopalakrishnan as well as by an international engineering consultant.

The idea of gold plating betrays a lack of knowledge of business economics. Inflating the expenditure does not benefit any stakeholder – neither the contractor nor the government. No company would like to increase its investment unproductively.

Every additional dollar of wasteful investment dents the profit of the contractor. For a business enterprise, there is no motivation to gold plate its investment. Due to the higher profits generally earned by the contractors, the loss to the contractors due to inefficiency or gold plating is higher than to the government.

(Excerpted from a detailed note on the DGH website)

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Interestingly, the first lot of information sourced by TEHELKA have established — beyond doubt — a definite, personal linkage between Sibal, his family members and top officials of RIL.

Consider the coincidence that even as RIL’s request for increasing the capital expenditure cost for the KG gas basin was pending before Sibal’s DGH in 2005, his daughters used the plush RIL guesthouses in Mumbai extensively for four to five months. This runs counter to Sibal’s and RIL’s claims that his daughters used the guest houses for a couple of weeks.

The CVC is probing whether Sibal received any favours from oil and gas contractors

Worse, as the head of the country’s oil regulator, Sibal had unlimited access to the guesthouses of some of the stateowned companies such as the Oil and Natural Gas Corporation, Bharat Petroleum, Indian Oil and Gas Authority of India. No wonder then his choice of the RIL guesthouse drew flak, especially because it was during the time when papers from RIL and others were with him for sanctioning.

While Sibal refused to be drawn into detailed deliberations, his senior technical advisor at DGH, SV Raju, maintained that there were no links between his boss and RIL. “We will clarify everything if asked,” he told TEHELKA.

Sibal had initially said the CAG had approved the Capex of KG basin, but CAG denied it

BUT THE records show exactly the opposite. Sonia Sibal stayed at Dalal House — the VVIP guest house of RIL – from July to November 2005 in a suite next to the one permanently reserved for RIL Chairman Mukesh Ambani’s wife Nita. Interestingly, in November the same year, Sibal’s other daughter Priya also stayed at the same guest house. The following year, Priya also stayed at another RIL guest house — Trivoli Guest House — from April to July.

Sibal’s daughters stayed at a plush RIL guest house in Mumbai for many months

That contact continued even when Priya shifted from RIL’s guest house and moved into a spacious flat in Avalon Complex in Powai’s Hiranandani Gardens. TEHELKA has papers that clearly explain how RIL acquired a small firm, Whitesnow Trading Private Limited, and used it as a front company to buy this flat for Priya’s use. That she stayed there can be proved from the fact that Whitesnow, in a letter dated June 7, 2006, wrote to the apartment maintenance staff, asking them to issue a club house ID card to Priya and her family. Correspondence between Priya and an RIL official show a distinct personal connection. In one such communication, on July 17, 2006, she referred to one RIL official as “uncle” and sought an LG television and refrigerator and a Whirlpool washing machine for her use.

The CVC is probing an alleged link between Sibal and owner of his rented home in Noida

According to information available with TEHELKA, it was clear that Prasad and LV Merchant — RIL’s chief financial controller — personally took care of making her stay comfortable and spent a good Rs 6.5 lakh towards furnishing and the installation of white goods in the flat.

While Sibal has denied he has any property other than two flats in Greater Noida, the CVC is also looking into whether his daughters own any properties in Mumbai through benami means.

Cosy ties A file photograph of the building in Mumbai where Sibal’s daughter allegedly stayed
Cosy ties A file photograph of the building in Mumbai where Sibal’s daughter allegedly stayed

The CVC is also probing links between Sibal and the owner of his office premises at Noida. Though Sibal has, on record, denied that there was any link between him and Ambience Exim Private Limited, the company that owns the building in which the DGH offices are located, papers accessed by TEHELKA clearly establish a link. Those close to Sibal confirm that Naresh Sethi is an old friend of Sibal’s. His wife, Manjula Sethi, owns Comet Energy Solutions and Ambience Exim Private Ltd. Interestingly, Comet owns flat number 1007 in Samarth Aangan, Oshiwara (Andheri) where Priya stayed before moving to the London School of Economics.

Ambience also owns the C-139 premises in Sector 63 Noida, where the DGH office was shifted in 2007 at a rental of Rs 22.40 lakh per month. Naresh Sethi works for Comet and represents Weatherford Services, an international firm in the exploration business. He is also the unofficial agent for GX Technologies (GXT) and Alcoke Mcfarr India. The same GXT was awarded the contract for acquiring 2D seismic data for NELP-VIII along the country’s east and west coasts. Alcoke McFarr Geotech India Private Limited has been awarded the gravity and magnetic speculative surveys.

That’s on the official front. On the personal front, the CVC is also probing whether there are any links between Sibal and the owner of the rented bungalow where he stays in Noida. Sibal lives at C-8 in Noida’s Sector 39. The bungalow is owned by Jagjot Singh Anand who charges a monthly rent of Rs 34,000, paid by Sibal’s former employer, Oil India.

This rent is too low, compared to the market rate: the actual rent should be about Rs 1 lakh per month. Informed sources say the low rent is because Sibal, then at the rank of additional secretary, was sanctioned a house rent allowance of Rs 35,000. If Oil India had to pay the market rent, Sibal would have had to shell out the remaining Rs 65,000 per month from his own pocket.

The CVC is also intrigued as to how Anand’s wife, Mohinder Kaur Anand, floated Quest Petroleum in April 2008, barely two months before the deadline for submitting bids in NELP VII, and was awarded exploration block CB-ONN- 2005/11 in November 2008 even though it had no prior experience.

If this is an orchestrated campaign to malign Sibal, someone has taken the trouble to bank a huge trail of logs linking him to this particular blaze. As the saying goes, when there is so much smoke, somewhere there must, indeed, be a fire. What the smoke signals say, however, is for the vigilance commission to decipher.

shantanu@tehelka.com

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