The Comptroller and Auditor General has advised the Gujarat government-run GSPC Ltd to be more cautious while venturing into overseas exploration of oil and gas, as the company surrendered 10 out of 11 overseas blocks between 2011 and 2015 after spending a lot of money.
The report, tabled in the Assembly today, also said that even the domestic exploration by the Gujarat State Petroleum Corporation generated meagre revenue.
CAG presented a gloomy picture of GSPC's finances, as its borrowings stand at 19,716 crore as of March 2015, a jump of 177 per cent since 2011.
"The company went ahead acquiring overseas blocks during 2006-2010 mainly as an operator with considerably high participating interests and without any prior experience overseas. The delayed execution of work resulted in cost escalations in such blocks," it said.
It spent Rs 1,757.46 crore on 10 surrendered overseas blocks, of which Rs 1,734.12 crore were eventually written off. Of the 11 overseas blocks held as of 2011, 10 were surrendered by 2015, the report said.
Among the major surrendered blocks were North Hap'y and South Diyur blocks in Egypt.
"The delays in execution of minimum work program led to huge cost over-runs in North Hap'y block, as the company incurred USD 263.98 million which was 76 per cent higher than the committed expenditure of USD 150 million."
GSPC had 64 blocks as of April 2011. But 37 blocks, including ten overseas, were surrendered between 2011 and 2015 and exploration expenditure of Rs 2,514.65 crore was written off, CAG noted.
In much-hyped KG Basin block, the trial production started in August 2014 but the commercial production had not started as of November last year, it said.
GSPC had to rely heavily on borrowings mainly for the activities in the KG block. The total interest burden increased from Rs 981.71 crore in 2011-12 to Rs 1,804 crore in 2014-15, the report said.
In future, GSPC should assess the risk while venturing into exploration, and "means of risk mitigation, such as induction of strategic/financial partners may be timely considered", CAG said.
