Troubled oil

It is to the dubious credit of the quasi Oil regulator, the director general of hydrocarbons (DGH), that his actions have simplified the otherwise complicated business of policing oil exploration. As this newspaper reported yesterday and has done so in the past, DGH seems determined to exceed his brief, in part by redefining it via taking liberties surely not available to responsible officials. A sample of DGH’s actions: he has fined oil explorers when there have been doubts about his powers to do so in that context; he has denied additional exploration time to some parties, most likely usurping the oil ministry’s powers, he has briefed reporters about not sanctifying oil exploration claims of some parties, an extraordinary way of doing things when shares can move sharply on such media comments; his recommendation that one oil company be denied the right to explore 12 blocks it had won the bids for was turned down by a group of secretaries.

This is a pretty impressive list and it raises two questions. First, is the Government going to be satisfied with periodically censuring DGH, what about looking at a more substantive approach? Second, while the ministry has been acting as a last line of defence against some of DGH’s overzealous actions, how can the ministry not realise that its own position is compromised, at least in principle? The ministry is an interested party in all oil/gas exploration disputes; production contracts are drawn up between the explorer and the ministry. The possibilities of controversies over the ministry’s ruling always exist; they were realised over its ruling in the gas supply dispute between the Ambani siblings.

The obvious solution is to set up a body independent from the ministry and senior to DGH. Something akin to the appellate tribunal that operates in telecom. Indeed a tribunal will act as a curb on DGH’s enthusiasm, because the director general views the ministry as almost an equal, often citing a September 2006 notification as a basis for his ‘powers’. This bureaucratic hair-splitting can continue for ever. A tribunal would, as it were, pour water over troubled oil.

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