CORRUPTION AND cronyism in the allocation of natural resources have been dominating the national discourse for more than two years. The giving away of precious 2G spectrum and coalmines by the Congress-led UPA regime has triggered anti-graft movements and invited unprecedented scrutiny from institutions such as the CAG, the Supreme Court and the media. But in the heat and dust of accusatory politics and competitive journalism, there is one shady deal involving a precious natural resource worth billions of dollars that has escaped public scrutiny. The deal involves the Narendra Modi government and a dubious company incorporated in the Caribbean island of Barbados.
In perhaps what would qualify as one of the most scandalous contracts ever signed, the Modi regime gave away a 10 percent participating stake in an expansive gas field it had won in a bidding process to a company named GeoGlobal Resources that existed only on paper. The company, incorporated in Barbados, had a capital of just $64.
The deal was inked in March 2003, when the BJP was in power both at the state and the Centre. Shockingly, the Barbados-based company didn’t pay a single cent for its stake. Even the company’s 10 percent share to the cost of exploration was borne by a state PSU, the Gujarat State Petroleum Corporation (GSPC). Within days of signing the contract with the Gujarat PSU, GeoGlobal parked 50 percent of its stake in the KG Basin to another shell company in Mauritius.
The Gujarat government has justified this sweetened deal on the sole ground that GeoGlobal was a technical expert and had helped the government in preparing the geological model for gas exploration. But in its latest report, the CAG has pointed out that GeoGlobal’s technical assistance has been so deficient that GSPC had to hire another technical expert to revise the geological model from scratch. The revised technical advisory work cost the government just Rs 2.64 crore. While for the same work, it had given GeoGlobal a permanent stake of 10 percent worth millions of dollars.
THE STORY AT A GLANCE
- The Modi regime gave 10 percent stake in a KG Basin gas field to GeoGlobal Resources, a company only on paper, incorporated in Barbados
- GeoGlobal, a one-man firm controlled by Jean Paul Roy, was formed just six days before the JV with GSPC, and was incorporated with a capital of just $64
- GeoGlobal was picked as JV partner in a whimsical and arbitrary manner. No tendering procedure or transparent methods were adopted in selecting the company for the project
- The worth of 10 percent stake could run into millions of dollars with total gas reserve in the field expected to be between 2 and 20 trillion cubic feet
- GSPC also gave GeoGlobal a carried interest, as per which its 10 percent share towards capital and operational cost was borne by the state PSU
- GeoGlobal’s work was so deficient that GSPC had to hire another technical expert, for which it was paid Rs 2.64 crore. A job for which GeoGlobal got a stake worth millions of dollars
- So far, GSPC has spent in excess of Rs 20,000 crore in drilling and exploration costs. GeoGlobal’s share of Rs 2,000 crore towards expenditure cost has been borne by GSPC
- Within days of signing the contract, Roy transferred 50 percent of his share in the KG Basin deal to a dubious entity incorporated in Mauritius
- The nominal value of each share of GeoGlobal at the time of incorporation was $0.001. In January 2006, the shares hit a high of $14.92 per share
- The 15,000-time appreciation in the share price was achieved on the strength of the sweetened KG Basin deal
- The commercial operations in the KG Basin offshore block would commence from July 2013. GSPC is expected to drill 11 deepwater wells
On 27 March 2002, the GSPC formed a consortium with GeoGlobal Resources India Inc and an Indian company named Jubilant Enpro Pvt Ltd. GeoGlobal was incorporated only six days before the formation of the consortium and was effectively controlled by a single person named Jean Paul Roy, a resident of Guatemala. The consortium was formed to bid for a gas block measuring approximately 4,57,000 acres in the Krishna-Godavari Basin off the east coast of India under the National Exploration Licensing Policy III framed by the BJP-led NDA government.
At the time of bidding, the Gujarat government claimed that the gas field, designated as Block KG — OSN — 2001/3, had over 45 trillion cubic feet of recoverable gas. As per the Modi government’s own estimates, the gas field was worth about $20 billion.
The absurdity of the deal could be gauged from the fact that the Modi government gave away 10 percent stake, which in its own eyes was worth millions of dollars to GeoGlobal on the ground that the company had international experience and a proven track record in the oil and gas exploration field. On the other hand, in its disclosures before the US authorities, GeoGlobal told its shareholders that the company had no exploration experience before venturing into India and the GSPC-led joint venture was its first foray in the oil and gas exploration business.
TEHELKA’s investigation shows that the company was fully controlled by Jean Paul Roy, who is a geologist by profession and had worked with various oil companies as a geological expert before forming this company. After entering into a joint venture with GSPC, Roy used this deal to showcase his credentials as the head of a corporation and entered into nine more contracts with the Government of India, a majority of which were signed when the NDA regime was in power.
“We are in the early stage of developing our operations. We have a very limited operating history and we have realised very limited revenues from our activities. Our activities in the oil and natural gas exploration and production industry have primarily involved entering into 10 Production Sharing Contracts (PSCs) with the Government of India,” reads a company quarterly report for the period ending 30 June 2012.
Shockingly, GSPC also agreed to contribute GeoGlobal’s share of 10 percent to the venture fund set up for the exploration activities and the same was to be recovered only after the joint venture starts earning revenues from the sale of gas.
After entering into a JV with GSPC, Jean Paul Roy used this deal to enter into nine more contracts with the Government of India, a majority of which were signed when the NDA was in power
Reportedly, GSPC has so far spent around $3.069 billion towards exploration costs. GeoGlobal should have contributed $306.9 million out of the total cost. But it is the taxpayers of Gujarat who have been made to fund GeoGlobal’s share of expenditure.
By virtue of this agreement, it’s the taxpayers who have been made to finance GeoGlobal’s activities, while the company has walked away with a 10 percent Participating Interest in the gas field, a national wealth.