ONGC Videsh splurging money on bad assets: CAG

The Comptroller & Auditor General of India has strongly criticised the Oil & Natural Gas Commission for making ill-considered foreign acquisitions through its overseas arm ONGC Videsh Ltd, pointing out that some of these acquisitions have resulted in huge losses for the state-owned explorer.

In a report tabled in Parliament on Thursday, the CAG has said that improper evaluations while investing in assets abroad has resulted in unfruitful expenditure of over Rs2,300 crore. Needless to say, all these losses ultimately come out of the taxpayer's profit.

The CAG conducted a performance audit of 20 of the company's 45 exploration and production (E&P) assets for the period April 2004-March 2010. 

The report of the government auditor particularly pointed out the $2 billion (Rs10,320 crore) purchase of Imperial Energy Corp's oilfield in Russia in January 2009.

This has turned out to be a serious blunder, with ONGC Videsh piling up a loss of Rs1,182 crore in the first two years of its operations, as most of the wells drilled to produce more oil are turning out to be dry.

The investment in the oilfield was cleared by the cabinet committee on economic affairs (CCEA) in August 2008, subject to the stipulation that the internal rate of return (IRR) on the investment should be more than 10 per cent. But the company has run up a huge loss instead due to the "unrealistic estimation of reserves", the report points out.