Delay in audit award for 41 production contracts

Vol 7, PW 12 (27 Aug 03) People & Policy

Delay in the oil ministry is holding up the formal appointment of five accounting firms selected by the Directorate General of Hydrocarbons to audit 41 production sharing contracts dating back to 1991.

The five companies selected to audit the 10 discovered fields and 31 exploration blocks are PriceWaterhouseCoopers, KPMG, Haribhakti & Co, Memani, Garg Agarwal & Co and Nangia & Co. The DGH needs clearance from the oil ministry as it is conducting the audits of these blocks on behalf of the government of India, said a source.

The profit petroleum in question goes to the government, not to the DGH. We understand PriceWaterhouseCoopers bid the lowest for 23 PSCs - the largest number - followed by KPMG who bid lowest for eight, Nangia & Co who bid lowest for five, Memani, Garg, Agarwal & Co who bid lowest for three blocks and Haribhakti & Co who bid lowest for the remaining two.

Despite PwC's knockout prices (see below tables), it will only be awarded five PSCs automatically. According to complex DGH rules, the lowest bidder for the most PSCs is not permitted to audit them all.

Instead, the DGH will award a maximum five blocks to one audit firm after which the next lowest bidder will be asked to match the rates of the lowest bidder for other PSCs. Should the second lowest bidder refuse to reduce his price, the DGH will approach the third lowest bidder.

If this bidder too refuses to match the lowest bid, the DGH will re-tender the audit. We are told the list of selected bidders is now awaiting oil ministry approval.

Technical and price bids were opened on 25th June and selected firms are impatient with the delay. Earlier they said, the contracts will be in place when Avinash Chandra (DGH boss) is back from the NELP-IV," reveals a source.

"Now we hear the file is pending with the ministry." The DGH received some 40 bids. Ernst & Young and Deloitte Touche Tohmatsu bought the tender documents but did not bid.

The DGH wants us to complete the audit in just 60 days," adds a source. "I wonder how much more time it will take just to award the contracts.