Internal Audit Report Rajasthan Project - Oil India...Jaisalmer Basin 239.381 203.579 205.260...

Internal Audit Department of 41

Internal Audit Report – Rajasthan Project

Report No. IA/RP/FY-2013-14/Q3

Period Covered – Oct’ 2013 to Dec’ 2013

Report date: 24.05.2014


OIL INDIA LIMITED

INTERNAL AUDIT DEPARTMENT

(For Internal Use Only)

Executive Director (Rajasthan Project)

OIL, Jodhpur

Sub: Internal Audit Report for the period October’13 to December’13 (Q3) of Rajasthan Project

1.0 The Internal Audit Department has conducted the audit of RP for the period from October’13 to December’13.

The audit areas, which have been covered during the audit, have been enclosed herewith (Chapter 2). The audit

has been conducted on the basis of generally accepted audit standards in India.

2.0 The audit observations, based on the documents produced and the explanations received, are shown in Chapter

3 with the Management‘s views duly incorporated against therein.

3.0 Implementations of the recommendations of the audit should be completed as early as possible but not beyond

the implementation timeline specified in Chapter-3.

4.0 The Internal Audit Team is pleased to acknowledge the cooperation received from the concerned sectional Heads

& their representatives in conducting the Internal Audit.

(Rupam Barua)

Head (Internal Audit), i/c

For Director (Finance)

Date: 24.05.2014

CC: CMD / D (E&D)/ D(HR&BD)/ D(O)/ D(F)/ GM(F&A)/ Head(Finance),Corporate/ CMFA(RP)


Report No. IA/RP/2013-14/03

CONTENTS:-

Chapter 1 Introduction ……………………………………………………..................................... 4 Chapter 2 Scopes & Road Map of Audit……………………………………................................ 10 Chapter 3(a) Executive Summary ……………………….......................................................... 11 Chapter 3(b) Detailed Audit Observation........................................................................... 15 Chapter 4 Annexure..................................................................................................... 27 Chapter 5 Follow up Status of Previous Internal Audit…………………….......................... 29


Chapter 1

1.0 Introduction:

1.0 Oil India Limited (OIL) has one project in Northern Region i.e. Rajasthan Project, with project office located in

Jodhpur. Oil India Limited (OIL) is presently producing natural gas from the state of Rajasthan contributing about 8%

of the company’s annual total gas production in the country. Presently, OIL is operating in 3 New Exploration Licensing Policy (NELP) blocks in the state and 2 Mining Leases (ML) which are as follows:

Present Areas of operations in Rajasthan

Sr. No Block Type

1. RJ-ONN-2004/2 NELP-VI

2. RJ-ONN-2004/3 NELP-VI (Being Relinquished)

3. RJ-ONN-2005/2 NELP-VII

4. Jaisalmer ML Nominated

5. Baghewala ML Nominated

2.0 The Dandewala gas field of Oil India Limited was discovered in 1990 when well DND-1 struck gas in the Pariwar

reservoir of Lower Cretaceous. This is in the Jaisalmer ML. The gas is being produced from Dandewala, Tanot and

Bagitibba fields in Jaisalmer district. Gas produced from these fields is supplied to M/s. Gas Authority of India

Limited (GAIL) who transports it through its pipeline to Ramgarh Power Plant of M/s. Rajasthan Rajya Vidyut Utpadan

Nigam Limited (RRVUNL).

3.0 Gas production during the last 5 years from OIL’s Rajasthan Project is tabulated below:-


Natural Gas Production (MMSCM) from Rajasthan Project

State / Basin 2007-08 2008-09 2009-10 2010-11 2011-12

Rajasthan / Jaisalmer Basin

239.381 203.579 205.260 157.361 223.366

To increase gas production, OIL is planning to drill few development wells and to carry out work over in a few sick

wells in its Rajasthan assets.

4.0 Heavy Oil:

Heavy oil was first discovered in the year 1991 in Baghewala well No.1 in the Baghewala structure of Bikaner - Nagaur

Basin within Jodhpur sandstone.

In the recent exploration efforts made by OIL in NELP regime, heavy oil was stuck in the 3RD well (Well Punam-1)

drilled in the block RJ-ONN-2004/2 (NELP-VI) followed by another discovery at well TVW-2 of Baghewala ML during

the year 2012.

Since in-house expertise for production of such type of heavy oil was not available, OIL engaged M/S Alberta Research

Council (ARC), Canada in 1992 to carry out a feasibility study for exploitation of heavy oil using cyclic steam

stimulation (CSS) and bottom hole heater (BHH). In the year 2002, a detail feasibility study was carried out in

collaboration with M/s PDVSA, Venezuela under a contract agreement signed. However, both the two attempt for

steam injection could not be succeeded commercially.

Presently OIL floated an Expression of Interest (EOI) for consultancy services seeking interest from companies having

adequate knowledge base and past experience in the field of Heavy Oil Production. Depending on the success of the

Project a comprehensive field development plan will be formulated for commercial production of the heavy oil.

5.0 Exploration & Development Activity: Presently, Oil India Limited (OIL) is having three New Exploration

Licensing Policy (NELP) blocks and two ML areas in the Northern state of Rajasthan. Details are given below:


A. PML Area:

Name of PEL/ML Area

(Sq. Km)

Other

Partners Present Status

Jaisalmer ML 250 - Producing gas @ 0.65 MMSCMD

Baghewala ML 210 - Action in hand to carry-out a R&D Pilot project for exploitation

of heavy oil

1. Jaisalmer PML:

(i) Drilling Program: Five (5) development wells and one (1) water Disposal well were proposed for drilling vide

RDGN-24 in March 2012, out of which 4 locations were released vide letter E&D/2.2-614 dated 28.08.2012.

(ii) Work Over Program: Total of 20 work over wells have been planned in the Jaisalmer PML area including one

plug setting job for the well Rachan-1 (Loc. RBAE) block RJ-ONN-2004/3 (NELP-VI)

2. Baghewala PML:

(i) 4 development wells (2 vertical and 2 horizontal) have been planned for experimental production of heavy oil by

drilling in the Baghewala Structure. Two vertical exploratory wells have also been planned for delineation of the

Punam Structure in the PML area.

(ii) EOI for exploitation of high viscous heavy oil in Baghewala PML area of Bikaner-Nagaur Basin was floated in

print media as well as in OIL website on 07.11.2012. The last date for submission of EOI was extended up to

06.12.2012. In response to that 10 parties both international and national, have expressed their interest for the

job. At present the credentials of the parties are being scrutinized.


B. NELP Area:

Name of PEL/ML Area (Sq. Km)

Other Partners (PI%)

Present Status

RJ-ONN-2004/2 (NELP-VI) AS OPERATOR (Charanwala)

2196 OIL (75) GGR (25)

Initial phase of exploration. Two wells drilled and abandoned due to poor hydrocarbon prospects. Drilling of 3rd well, Punam-1 (Loc. RBAO) completed & heavy oil discovery has been notified. MC approved the Appraisal Work Plan. Internal proposal note for appraisal drilling is being made. Action in hand to hire a drilling rig for appraisal well drilling and drilling of loc. RBAP. BDC meeting held on 21.10.2013 at Corporate Office in connection with PI transfer for M/s GGR . BDC approved the proposal. Board note sent to Corporate Office on 05.11.2013. Board approved the same. Further action is in progress in this regard.

RJ-ONN-2004/3 (NELP-VI) AS OPERATOR (Deviwali)

1330 OIL (60) GGR (25) HPCL (15)

Drilled 2 wells - indicating poor hydrocarbon prospectively of the block. Relinquishment Process for the block is currently on. Provisional LD submitted as per well depth of 1500 m against committed well depth of 2500 m for 6 wells. The matter is being reviewed at DGH. The balance amount of unfinished work to be paid will be intimated to OIL after approval from MoP&NG. The project has also sent all deliverables (both soft copies and hard copies) to DGH pertaining to block relinquishment. A copy of the same has also been sent to Directorate of Petroleum, Govt. of Rajasthan.

RJ-ONN-2005/2 (NELP-VII) AS OPERATOR (Kalibar)

1518 OIL (60) HMEL (20) HOEC (20)

Processing of Seismic data completed on 17.06.2013, Received one set of Pre-STM and Post SDM data from M/s GT. Final deliverables awaited from M/s GT, Poland. In-house interpretation of 3D Seismic data is in progress at TEAM Centre in Duliajan. The drilling is expected to start by October 2013 in this block. As per the MWP, total nine (9) wells are being planned in this block. However as on the date of this report, drilling has not yet commenced. Proposal for 1st Extension of Phase-I submitted to DGH on 06.06.2013 as Phase-I of the block expired on 12.07.2013. MC approval obtained for Phase-I extension for six(6) months w.e.f. 13.07.2013 i.e. upto 12.01.2014. MC meeting held on 09.12.2013 for further course of action in the block. A letter submitted to DGH along with MCR on 12.12.2013 pertaining to Excusable delays(526 days) for the block for un-interrupted exploration to complete the remaining MWP.


Name of PEL/ML Area (Sq. Km)

Other Partners (PI%)

Present Status

GK-OSN-2010/1 (NELP-IX) (As Non- Operator)

1361

ONGC (60%) (O) OIL (30%) GAIL (10%)

Initial Exploration period is going on. Relief maps on Trap top & Trap bottom based on available well data & 2D Seismic Data has been prepared. Presentation before Expert Appraisal Committee (EAC) of MOEF for getting Terms of Reference (TOR) for Preparation of EIA reports has also been made on 11.06.2013 by the Operator.

C. Relinquished blocks shown by the Project:

Sl. No.

Name of PEL NELP Round

Operator JV Partners

1 RJ-ONN-2000/1 NELP-II OIL (60%) SUNTERA (40%) -

2 RJ-ONN-2001/1 NELP-III OIL (40%) ONGCL (30%) SUNETRA (30%)

3 RJ-ONN-2002/1 NELP-IV OIL (60%) ONGCL (40%) -


2.0 Background of conducting Internal Audit: The Internal Audit of Rajasthan Project, for the period from 3rd Quarter ended 31st Dec 2013 of financial year 2013-14,

has been conducted by Internal Audit Department. The Audit has been conducted based on the audit areas as

approved by competent authorities. A team comprised of Shri Jyotirmoy Bhattacharya, Sr. Manager (IA), Shri A.K

Sinha, Dy. Manager (IA) and Sh. B.K.Borsaikia, IAO conducted the audit.

The audit for the aforesaid period has been conducted within 6 working days between 19th March’13 to 25th March’13, at the Jodhpur office.

The Audit Report includes observations and recommendation of Team Internal Audit, related risk, and the

corresponding management’s comments received against thereon. The audit also includes, review of the compliance of the previous audit reports.

3.0 Objectives:

The basic objectives of the internal audit were to review the overall accuracy and adequacy of the Internal

control System and the compliances with the laid down procedure of the company.


Chapter 2 Scopes & Road Map of Audit

2.01 Scope and Approach

2.01.1 Scopes: The internal audit was conducted for the period Oct’ 2013 to Dec’ 2013 and covered the following audit areas/ functions:

a) Contract / Purchase review b) Review Of Cash /Bank Management System c) Tax related review d) Accounts Payable e) Employee payment review f) Review of Budgetary Control (Capital) g) Miscellaneous review h) NELP Blocks Review ; i) Scrutiny of Sales

2.01.2 Approach: Approach to the internal audit commenced with an overview of activities and

documentation of the existing systems and procedures. The adequacy, efficiency and effectiveness of internal

controls have been evaluated & tested by checking samples of transactions for the period covered by the audit.

Adherence to the laid down standard policies and procedures (wherever applicable) for each of the audit areas

have been examined.

2.02 Risk Based Internal Audit

The concept of Risk based audit has been followed considering the following areas of risks:

1) Financial Risk: An event is recognised as a financial risk if there is any possibility of occurrence of financial loss to the Company due to that event or transaction.

2) Compliance Risk: A risk is identified as compliance risk if there is any deviation in legal or procedural obligations.

3) Operational Risk: A risk is identified as operational risk if any technical operation of a system is not done as per the norms or standard rules of operation


Chapter 3 (Part a)

Executive Summary of Audit Observations Sl Observations Recommendations Implementation

Time line

1 Status of Clearing Accounts:-Internal audit has review the clearing

accounts GL, namely, 221000,222020,220002, and 222000 and

observed that an amount of Rs.2,35,14,478 are lying open in the

system.

Old pending items in the clearing GLs

needs to be cleared on regular basis.

Audit suggest that the items which are lying open for than 6 months needs to be reviewed and action is to be initiated to clear all the pending items

As early as possible

2 Taxation Review

TDS deducted from OIL to an extent of Rs.9,42,720.20 in the GL-

560101 ( Loans & Adv Govt- TDS Certificate (IT) Received) lying open

since 2008.

Similarly – an amount of Rs 2,14,595 under the GL 560103 (TDS Cert

(IT) Receivable-Others are lying Open

The items which are lying open in the

system should be reviewed

periodically and necessary action

needs to taken to clear such

transaction.

As early as Possible

3 Review of the Bank Reconciliation Statement:

BRS for all the banks were tallies with the Bank Statement except the

Corporation Bank-Jodhpur-A/C No. 100062 where the differences for

the tune of Rs 10,00,000.45 were noticed.

Bank reconciliation should be reviwed

on a periodic basis and difference with

SAP balance needs to be reconciled on

regular basis.

Before closing of the

annual accounts for

the Financial year

2013-14.

4 Stale Cheques Internal Audit department has reviewed the stale cheque GL- Amounts lying in stale Cheque GL-200501 An amount of Rs 7,56,908 were lying open in the system

Amount lying under stale cheque

needs to be transferred to the revenue

accounts after a particular period of

time. Internal Audit suggests that

action should be taken to transfer the

amount lying in the stale cheque GL

in line with the practice followed in

the company.

Immediate


Sl Observations Recommendations Implementation

Time line

5 Review of Bank Guarantee in the SAP:- Internal Audit Department has evaluated the system of maintenance of Bank Guarantee RP and it has been observed that only 19 No of BG have been updated in the SAP. It seems that the most of the BG is yet to be updated in the SAP.

It is suggested to use the Transaction

code ZFIBG to maintain the Bank

Guarantee in the system. A detail

procedure has already been circulated

by the FI-ERP.


6 Review of Purchase & Contract

Award of Contract for Hiring of 1 No. Diesel Hydraulic Truck

Mounted Mobile Cranes having capacity of 30MT with operators

and crew on call out basis

Audit observes the following :-

i. No internal estimate was prepared although it is mandatory ;

ii. No approval for cancellation of PR for Rs.77.40 lacs was

obtained ;

iii. To avoid time loss, normal open tendering process was not

followed although there was a time loss for the same ;

iv. PR revised after receipt of opening of tender and price

negotiation which is highly irregular.

It is suggested to follow the normal

tendering process by planning in

advance.

BRC/BEC criteria as approved should

be strictly followed.

Necessary changes in PR have to be

carried out before tendering process

and price negotiation.

PR not required should immediately

be cancelled with proper justification.


7 Review of Purchase & Contract

Waiver of LD not approved for procurement of Spares of Control

Valve Positioner of DND-GPC Plant & TOT-GGS

From the above Audit observes the following :-

It is suggested to follow the normal

tendering process even for the

proprietary items. In case of offers

not received in proper manner, the

NIT should be cancelled and




Time line

i. Proper tender opening process was not followed while accepting

and opening the offer ;

ii. Deviation of Liquidated Damage(LD) clause - As per the

standard LD clause of the company(OIL), maximum LD

applicable is 7.5% for the undelivered portion of the material if

the delivery is beyond 15 weeks considering a damage rate of

0.5% per week, whereas the party has requested the project to

accept a revised and reduced penalty clause i.e. LD of 0.5% per

week subject to maximum of 5% for undelivered portion for any

delay in dispatch after 18 weeks from the date of receipt of

technically and commercially clear PO from the company.

iii. PO was issued to the party without any proper approval from

CBC , nor the same was appraised to CBC resulting a violation

of the company’s procedure .

iv. Other projects were also not contacted even after CBC’s advise to ascertain dealing of similar cases.

immediately refloated.

It is also suggested to apply standard

LD clause as far as possible rather

than accepting changed and reduced

clauses.

Project must co-ordinate with other

spheres as suggested by CBC for

enquiring of similar / identical cases

before placing Purchase order.

8 NELP BLOCK : RJ-ONN-2004/2

Outstanding issues with JV partner (M/s GGR)

Based on the actual expenditure from April, 2013 to December, 2013,

the total outstanding in this block has gone up to Rs.9,15,67,466/-

as per Cash Call Request letter sent by the project on 12/02/2014.

The said amount of Rs. 9.16 Crores comprises of Cash Call amounting

to Rs.7.46 Crores upto March, 2013 and the balance of Rs.1.70

Crores pertains to April’13 to Dec’13 only.

It is also observed that :-

(i) Pending Cash Calls are not being honoured / settled by M/s

GGR inspite of repeated requests from OIL. In this regard,

OIL as operator should strictly follow

the relevant clauses of JOA and apply

the same to avoid future complication.

Company should always endeavour to

raise Interest claim on cash call for

non realisation of the same.




Time line

(ii) OIL has not at all applied the provisions of JOA for

continuous default of Cash call by GGR neither has it

applied any other relevant clauses for realization of the

same.

(iii) No interest claim has been made by OIL as operator for the

long outstanding dues from GGR.

Moreover as per SAP, the cash call outstanding from GGR shows

Rs.9,17,81,941.30. Hence there is a difference of Rs.2,14,475/-

between SAP balance and Cash call request sent to GGR which needs

to be reconciled.

Cash call account should also be

reconciled.

JOA provision has to be applied for

default of cash call and other defaults.

Provision for unfinished MWP should

always be provided in the books of

accounts of the block instead of

providing the same in company.

9 NELP BLOCK : RJ-ONN-2005/2

Regular delay in realisation of Cash Calls from HMEL

It is noted that an amount Rs.1,10,92,596/- only is due from M/s

HMEL against the actual cash call upto 28.02.2014. Out of the same,

an amount of Rs.90.83lacs towards actual expenditure upto

September’13 remained outstanding for more than 5 months.

OIL as operator should strictly follow

the relevant clauses of JOA and apply

the same to avoid future complication.

Company should always endeavour to

raise Interest claim on cash call for

non realisation of the same. Moreover

regular reminders/ frequent follow-

ups are also required to realise the

money already spent by the company.

Immediate

compliance and

follow up


Chapter 3(b)

Detailed Audit Observation

SL. No

Observations Risk Recommendations Management Comments

1. Status of Clearing Accounts Internal audit has review the clearing accounts GL, namely, 221000, 222020, 220002, and 222000 and observed that an amount of Rs. 2,35,14,478 are lying open in the system. The GL wise details are as follows:- GL Amounts.(Rs.) Clearing Acct-SR / IR-Services-221000 34,09,054

Clearing Acct-Customs & Non Modvatble Duties – Rev-222020 22,01,260

Clearing Acct-GRIR-Capital Goods-220002 65,26,540

Clearing Acct-Inland Freight –Revenue GL-222000 1,13,77,624

Total 2,35,14,478

On further scrutiny of these GL, it was observed that the few of item are pending since 2006-07 onwards. The age wise and GL wise analysis are also given below for the ready reference. (a) Clearing Acct-Inland Freight –Revenue GL-222000

Financial Year Amounts (INR) Nos of Line-items

2006-07 - 34,84,896 86

2007-08 - 4,82,245 53

2008-09 - 22,35,338 34

2009-10 -10,50,789 221

2010-11 - 4,93,795 89

2011-12 -30,45,638 96

2012-13 -3,05,672 28

2013-14 - 2,79,251 81

Total -1,13,77,624 688

Financial Old pending items in the clearing GLs needs to be cleared on regular basis. Audit suggest that the items which are lying open for than 6 months needs to be reviewed and action is to be initiated to clear all the pending items

a) Management comments-

Position of the GLs will be reviewed in the fourth qtr. as the balances shall undergo changes. Some of the items lying in the GLs pertain to financial year 2006-07 & 07-08 also as shown by the auditors in the age wise analysis. We are taking up the matter with the department concerned & look into this matter. Some of the GL items pertain to 2013-14 for which LIV is yet to be done.


SL. No


(b) Clearing Acct-GRIR-Capital Goods-220002

Financial year Amounts Nos of line-items

2007-08 -50,25,476 2

2009-10 - 21,410 1

2013-14 -14,79,654 35

Total -65,26,540 38

(c) Clearing Acct-Customs & Non Modvatable Duties – Rev-222020

Financial Year Amounts

No of Line-items

2007-08 -2,86,061 1

2009-10 -10,55,991 23

2010-11 - 7,08,866 4

2011-12 -1,50,342 31

Total - 22,01,260 59

(d) Clearing Acct-SR / IR-Services-221000

Financial Year Amounts

No of Line-items

2006-07 -5,483 2

2007-08 -1,70,900 1

2008-09 3,07,643 2

2009-10 -36,812.2 2

2010-11 -4,74,374 4

2012-13 -1,59,069 4

2013-14 -28,70,058 245

Total -34,09,054 260

b)Implementation Timeline: Immediate c)Implementation responsibility: All sectional Heads.


SL. No


2 Taxation Review TDS deducted from OIL to an extent of Rs. 9,42,720.20 in the GL-560101 ( Loans & Adv Govt- TDS Certificate (IT) Received) lying open since 2008. Similarly – an amount of Rs. 2,14,595 under the GL 560103 (TDS Cert (IT) Receivable-Others are lying Open. A detailed list of all such items are enclosed as Annexure-I

The items which are lying open in the system should be reviewed periodically and necessary action needs to taken to clear such transaction.

a) Management comments-

Items are lying open in GL 560103 as no TDS certificate has been received from concerned parties .Follow up action is already taken & GL will be cleared once we get the TDS certificates. In GL 560101, entries will be passed by Taxation cell, Djn after receipt of certificates from our side. b)Implementation Timeline: Immediate c)Implementation responsibility: CM (F&A), RP/ Finance


SL. No


3 Review of the Bank Reconciliation Statement Internal Audit has reviewed the BRS as on 31.12.2013 for all the Bank operated from Rajasthan Project. It has been observed that Bank Books for all the banks were tallies with the Bank Statement except the Corporation Bank-Jodhpur-A/C No. 100062 where the differences for the tune of Rs 10,00,000.45 were noticed. The same is depicted as under:-

Bank As per GL

Add cheque issue but presented for payment

Less cheque deposited but credited Total

As per Bank Statement Diff

SBI-Jaisalmer- 19,42,100.46 0 0 19,42,100.46 19,42,100.46 0.00 SBI-Jodhpur-Ac No 33,39,957.03 0 0 33,39,957.03 33,39,957.03 0.00 Corporation Bank- Jodhpur-A/C No. 7,17,21,768.68 21,62,955 -10,00,000 7,48,84,723.68 7,38,84,723.23

10,00,000.45

PNB-Jodhpur-Ac No. 1,11,91,953.95 0 0 11,191,953.95 11191953.95 0.00 HDFC Bank-Jodhpur 85,34,616.55 48,059 0 8,582,675.55

8,582,675.55 0.00

Financial Bank reconciliation should be reviewed on a periodic basis and difference with SAP balance needs to be reconciled on regular basis.

a)Management comments- This has been taken care off. b)Implementation Timeline: Immediate c)Implementation responsibility: CM (F&A), RP

4 Review of Stale Cheques- (200501) Internal Audit department has reviewed the stale cheque GL- Amounts lying in stale Cheque GL-200501. An amount of Rs 7,56,908 were lying open in the system. Few of the stale cheques are more than 3 years old. Lists of such stale cheque are given below-

Assignment

Document

Bus Area Posting Date Amounts (Rs) Text No

ch no 797018 corp 2610008601 RJ01 01.11.2010 1,539.00

stale cheque transferred

CH NO 837412 2610009370 RJ01 31.12.2010 600 HOTEL NEERAJ

20110331 3310027838 RJ01 31.03.2011 9,484.00

stale cheque CH 836682 JC JAWA

Financial Amount lying under stale cheque needs to be transferred to the revenue accounts after a particular period of time. Internal Audit suggests that action should be taken to transferred the amount lying in the stale cheque GL in

a) Management comments- These amounts have been transferred to Income GL. b)Implementation Timeline: As early as possible c)Implementation responsibility:


SL. No


20110331 3310027838 RJ01 31.03.2011 9,600.00

stale cheque CH 836692 URMILAKU

Total 21,223.00

line with the practice followed in the company.

CM (F&A), RP

5 Status of maintenance of Bank Guarantee in the System (ZFIBG) Internal Audit in its various reports had pointed out that the maintenance of Bank Guarantee in the manual system such as in excel sheet may lead to expiry of the BG, if the same is not being regularly monitored and it was suggested that the BG should be linked with purchase order/Contract maintained in SAP along with validity date of the Bank Guarantee so that an alert can be generated by the system well before the expiry of the Bank Guarantee. The issue was being regularly followed thereafter by the Internal Audit Department. Accordingly the FI-ERP has now come up with the customised programme for the maintenance of the BG/PBG in the system which is linked to the PO/Contract. (Except for the bid security). Few spheres have already started the maintained of BG in the system. Internal Audit Department has evaluated the system of maintenance of Bank Guarantee RP and it has been observed that only 19 No of BG has been updated in the SAP. It seems that the most of the BG is yet to be updated in the SAP.

Financial It is suggested to use the Transaction code ZFIBG to maintain the Bank Guarantee in the system. A detail procedure has already been circulated by the FI-ERP.

a) Management comments- This is a new transaction code meant for recording the BG details. We have started the process & shall be completed soon. b)Implementation Timeline: As early as possible c)Implementation responsibility: CM(MM)/CM(F&A)

6. Review of Purchase & Contract Award of Contract for Hiring of 1 No. Diesel Hydraulic Truck Mounted Mobile Cranes having capacity of 30MT with operators and crew on call out basis Initially a PR (no.2214911 dated 19/09/2013) was approved by the project management on 11/10/2013 for an estimated contract cost of Rs.57,40,000 for the above mentioned job for a period of 1 year with a provision for extension by another 6 months for OIL’s field at Baghewala Loc RBAO, RBAC,

a)Management comments-


SL. No


BGW-1, BGW-4, BGW-6 and Pilot Plant at BGW-6. Subsequently the PR was further increased to Rs.77,40,000 for one year with a provision for extension by another 6 months and approved on 28/10/2013. However on both the occasion, no Internal Estimate was prepared by the user department and as a result of that PR was treated as Internal Estimate. The approval for floating limited tender under single stage composite bid for Rs 16 Lakh was sought by the Purchase & Contract Department on 13/11/2013 from competent authority of the project. The same was approved on 20/11/2013 to float limited tender to five parties based on the discussion held on 7/11/2013 regarding “Preparedness for Production Testing of Punam#1” against PR no. 2215157 dated 08/11/2013 for Rs.15.91lakhs as per DOP Schedule No 43 of the Project. However, no approval was taken for cancellation of the earlier PR as mentioned above for Rs.77.40lakhs. As per MOM of the discussion on 7/11/2013, it was noted in Sl. No. 2 , that Material & Contract department should ensure the availability of the services on time ( by Mid Dec’2013) due to which normal open tendering process was also not followed to avoid time loss to finalise the contract on urgent operational requirement as intimated by Head(Services). However, the contract was awarded on 27th Jan, 2014 i.e. after a delay of more than a month to M/s Choudhary Transport Company, New Delhi at a cost of Rs.19,93,380/- (all inclusive) for a period of 3 months with a provision of extension of another 1 month. It was also noted that as per approved Section V BRC/BEC criteria, BRC Technical Criteria 1.7(a) , bidders must have an average Annual Turnover of not less than Rs.17.22lakhs for the last 3 years. Certified copy of the audited Balance Sheet , profit & loss account for the last three years should be submitted along with the technical bids. However as per NIT no. JCO1820 L14, the said criteria has been changed downward to Rs.5lakh whilst other following criteria of the contract were kept as per approval. Finally the quoted rates from the accepted offer of the L1 bidder are higher by as much as from 8.60% to as high as 152% as compared to to individual items reflected on the PR and overall higher by 51.74%. The rates as per quotation

Financial Commercial Risk

It is suggested to follow the normal tendering process by planning in advance. BRC/BEC criteria as approved should be strictly followed. Necessary changes in PR have to be carried out before tendering process

Reply received from CM(M&C) vide letter no. MM(R) /01/382 dtd 07.05.14 is reproduced as under :- a. PR# 2214911 was initially raised for a value of Rs.77.40 lacs. However, the Operating Department (Production) reviewed their requirement based on some queries raised by us and the PR was modified and fresh PR# 2215157 was raised by Production deptt. For estimated value of Rs.15,91,000/-. b. As a practice, PR estimate is submitted for value above Rs.50 lacs


SL. No


are much higher than the internal estimate of the same party. Hence price reasonableness are not properly justified. Even after price negotiation, the reduced rate was still 25.29% higher than the internal estimate and 11.51% more than the revised PR which was actually revised after opening of tender and subsequent price negotiation which appears to be highly irregular since revised PR was not at all approved by Project(Head) and more so copy of the revised PR was also not available in the relevant Contract file. Therefore audit observes the following :-

i. No internal estimate was prepared although it is mandatory ; ii. No approval for cancellation of PR for Rs.77.40 lakh was obtained ; iii. To avoid time loss, normal open tendering process was not followed

although there was a time loss for the same ; iv. PR revised after receipt of opening of tender and price negotiation which

is highly irregular.

and price negotiation. PR not required should immediately be cancelled with proper justification.

and the estimate is indicated in the PR for value up to Rs.50 lacs. c. Cancellation of PR is looked after by the User department. d. PR# 2215157 was not revised after opening of the tender. The reply is therefore self-explanatory. b)Implementation Timeline: As early as Possible c)Implementation responsibility: CM(M&C)/CM(F&A)


SL. No


7 Review of Purchase & Contract Waiver of LD not approved for procurement of Spares of Control Valve Positioner of DND-GPC Plant & TOT-GGS A tender proposal vide no. PP/4649/JID0645L14 dated 31.08.2013 for spares of Control Valve was put up to the competent authority of the project for procurement from the proprietary source M/s Mil Control Valve, Kerala at a total price of Rs.2.28lakh. The offer from M/s Mil Control Valve was not sent in a closed envelope super scribing the tender no. Therefore, the envelope was opened and receipt stamp was put as per the normal practice. Since it was a proprietary item, the offer was considered valid. Further the offer of M/s Mil Control Value had offered 45 days bid validity instead of OIL’s NIT requirement of 75 days. In reply to an e-mail from the project, M/s Mil Control Value had accepted the bid validity but expressed their inability to accept the Liquidated Damage (LD) clause since the same was not as per their company policy. Accordingly a note was put up to the competent authority of the project to waive of the LD clause. The project management remarked that the waiver of LD is beyond their jurisdiction and hence it is not possible. However on repeated requests from the project, the party confirmed their acceptance of our LD clause @0.5% per week subject to the maximum of 5% for undelivered portion for any delay in despatch after 26 weeks from the date of receipt of the PO. Again on request, the party has reduced the delivery time as 18 weeks. As per the standard LD clause of the company (OIL), maximum LD applicable is 7.5% for the undelivered portion of the material if the delivery is beyond 15 weeks considering a damage rate of 0.5% per week, whereas the party has requested the project to accept a revised and reduced penalty clause i.e. LD of 0.5% per week subject to maximum of 5% for undelivered portion for any delay in despatch after 18 weeks from the date of receipt of technically and commercially clear PO from the company. Accordingly an approval was sought before the project management for placement of order with M/s Mil Control Value for a sum of Rs.2,28,032/- with the revised and reduced LD clause which was approved by the project management with a condition of appraising

Financial / Commercial Risk

It is suggested to follow the normal tendering process even for the proprietary items. In case of offers not received in proper manner, the NIT should be cancelled and immediately refloated. It is also suggested to apply standard LD clause as far as possible rather than accepting changed and reduced clauses. Project must co-ordinate with other

a) Management comments- Reply received from CM(M&C) vide letter no. MM(R) /01/382 dtd 07.05.14 is reproduced as under :- Approving Authority advised to keep CBC posted on the matter and not for taking any approval from CBC. Accordingly letter no. MM( R)/01/904


SL. No


CBC and obtaining the approval for modification of LD clause which has been intimated to CBC on 02/12/2013 only. However, the Purchase Order No.7508925/JID was issued to the above mentioned vendor (Vendor Code 203084) on 26/11/2013 without CBC’s approval. From the above Audit observes the following :-

i. Proper tender opening process was not followed while accepting and opening the offer ;

ii. Deviation of Liquidated Damage(LD) clause - As per the standard LD clause of the company(OIL), maximum LD applicable is 7.5% for the undelivered portion of the material if the delivery is beyond 15 weeks considering a damage rate of 0.5% per week, whereas the party has requested the project to accept a revised and reduced penalty clause i.e. LD of 0.5% per week subject to maximum of 5% for undelivered portion for any delay in dispatch after 18 weeks from the date of receipt of technically and commercially clear PO from the company.

iii. PO was issued to the party without any proper approval from CBC , nor the same was appraised to CBC resulting a violation of the .

iv. Other projects were also not contacted even after CBC’s advise to ascertain dealing of similar cases.

spheres as suggested by CBC for enquiring of similar / identical cases before placing Purchase order.

dated 02.12.2013 was sent to CA(C&P) for keeping the CBC posted. The reply is therefore self-explanatory. b)Implementation Timeline: As early as Possible c)Implementation responsibility: CM(M&C)/CM(F&A)

8 NELP BLOCK : RJ-ONN-2004/2 Outstanding issues with JV partner (M/s GGR) The Production Sharing Contract(PSC) for the captioned block was signed between Government of India, Oil India Limited (OIL) and M/s Geo Global Resources(Barbados) Inc. (GGR) where OIL is having 75% Participating Interest(PI) and GGR is having 25% PI. The operatorship of the block is with OIL. As against MWP commitment of drilling of 12 exploratory wells, 3 wells have been completed. Moreover Reprocessing of 463 LKM, API of 733 sq km have

Financial Risk / Commerc

OIL as operator should strictly follow the relevant clauses of JOA and apply the same to avoid future complication. Company should always endeavour to raise Interest claim on cash call

a) Management Comments Cash call issue with GGR is a long pending issue & a lot of efforts have been put up to realize the outstanding cash calls. Matter has also been discussed


SL. No


also been completed. The block was having a hydrocarbon discovery in July, 2012. The second extension of the Phase-I of exploration period was completed on 20.07.2013. Presently appraisal plan has already been submitted to DGH and as per DGH instruction, the Declaration of Commerciality (DoC) is to be submitted by 16.06.2014. M/s GGR, the other partner of the block has not been paying the amount raised against them as “Cash Calls” for quite some time. As per the Audited Financial Statements of the block as on 31.03.2013, the cash call pending from GGR was USD1,474,367( Rs.7,45,93,324/-). Based on the actual expenditure from April, 2013 to December, 2013, the total outstanding in this block has gone up to Rs.9,15,67,466/- as per Cash Call Request letter sent by the project on 12/02/2014. The said amount of Rs. 9.16 Crores comprises of Cash Call amounting to Rs.7.46Crores upto March, 2013 and the balance of Rs.1.70Crores pertains to April’13 to Dec’13 only. It is also observed that the pending Cash Calls are not being honoured / settled by M/s GGR inspite of repeated requests from OIL. In this regard, it is observed that OIL has not at all applied the provisions of JOA for continuous default of Cash call by GGR neither has it applied any other relevant clauses for realisation of the same. It is also observed that no interest claim has been made by OIL as operator for the long outstanding dues from GGR. Moreover as per SAP , the cash call outstanding from GGR shows Rs.9,17,81,941.30. Hence there is a difference of Rs.2,14,475/- between SAP balance and Cash call request sent to GGR which needs to be reconciled. It is further observed that as per JOA between OIL and GGR, notices have to be served to Geo Global, Barbados which is a foreign entity. Hence Cash Call request should always be made both in USD and INR which was not done in the Cash Call request letter. OIL has also submitted Bank Guarantees (BGs) pertaining to GGR’s share (25%) for US$2,701,973 to DGH since GGR has not submitted their share. The BGs have been extended upto 31/03/2014.

ial risk Compliance Risk

for non realisation of the same. Cash call account should also be reconciled. JOA provision has to be applied for default of cash call and other defaults. Provision for unfinished MWP should always be provided in the books of accounts of the block instead of providing the same in company.

with GGR time & again. O.C. meeting have been held. Even matter was discussed in M.C. Meeting also. Several letters have been written by OIL. In fact, Director (Finance) also had written to them to clear the dues without delay. While raising the cash calls, we had been advising them to pay the cash calls with interest. Now, the matter has been referred to Arbitral tribunal which comprises of the retired supreme court judges. Further, we have engaged a legal council to represent our case to arbitrators & also to submit a claim document to


SL. No


Finally, OIL had taken a provision of its share (75%) of cost of unfinished Minimum Work Programme (MWP) for Rs.34.35Crores. However the same provision was wrongly taken in company code “OIL” instead of “JVC”. The share of GGR (25%) for Rs.11.45crores on account of cost of unfinished MWP has yet to be paid by GGR till the date of Audit. Hence the same is also required to be provided in the books of accounts of the block. Moreover due to non provisioning of this amount of Rs.45.80Crores in the books of account of the block, the cash call account is not properly showing the true and fair view of the account and understated by the said amount.

arbitral tribunal. Now, We shall have to wait till the matter is resolved by the arbitral tribunal. Further, issue of PI transfer is still pending & all the matters related to BG/LD shall be addressed thereafter. Reconciliation, wherever necessary, shall also be carried out. This is a matter of the fact that BG has been provided by OIL on behalf of GGR after due approval from the management. b)Implementation Timeline: As early as Possible c)Implementation Responsibility CM(F&A)


SL. No


9 NELP BLOCK : RJ-ONN-2005/2 Regular delay in realisation of Cash Calls from HMEL The project management raise Cash calls for the captioned NELP block on its JV partners viz. Hindustan Oil Exploration Company Ltd.(HOEC) and HPCL Mittal Energy Ltd.(HMEL) from time to time based on the Actual expenditure incurred. It is noted that an amount Rs.1,10,92,596/- only is due from M/s HMEL against the actual cash call up-to 28.02.2014. Out of the same, an amount of Rs.90.83 lacs towards actual expenditure upto September’13 remained outstanding for more than 5 months. Some of the cash calls are due even for more than 30 days. This can be explained with the help of following table :

It is also observed that the last cash call amount of Rs.5.16Crore for August’13 received from HMEL on 22nd November, 2013 only i.e. after a gap of almost 2 months. It has also been observed that M/s HMEL was regularly delaying the payment of cash call even on actual expenditure basis. Audit therefore observes that OIL as an operator of the block have not followed the procedure prescribed under various clauses of JOA (Article 7)for recovery of cash calls as and when the same become due. It is also observed that no “Interest” on delay of Cash call was charged to the company which has resulted a loss of interest by the company since the money was already spent by the Company and “Cash Call” rather than “Expenditure Call” has been raised on HMEL which was not honoured within the due dates.

Cash call for the month

Cash call date

Amount (Rs)

Due Date as per JOA (Max 30 days)

Date of Realisation, if any

Present status (as on the 26.03.2014)-

Upto Sept’13 19.10.13 90,83,480/- 19.11.13 Not received Delay > 5 months

Oct’13 18.11.13 5,03,289/- 18.12.13 -- do -- Delay > 4 months Nov’13 06.12.13 2,89,003/- 06.01.2014 -- do -- Delay > 3 months Dec’13 18.01.2014 5,23,632/- 19.02.2014 -- do --- Delay > 2 months Jan’14 12.02.2014 3,56,367/- 12.03.2014 -- do --- Delay > 1 month Feb’14 19.03.2014 3,36,825/- 19.04.2014 -- do -- Total 1,10,92,596/-

Financial Risk / Commercial risk

OIL as operator should strictly follow the relevant clauses of JOA and apply the same to avoid future complication. Company should always endeavour to raise Interest claim on cash call for non realisation of the same. Moreover regular reminders/ frequent follow-ups are also required to realise the money already spent by the company.

a) Management comments- We have been writing to HMEL while raising the cash calls to pay the amount along with interest. In fact, they have paid the cash calls & outstanding amount now is little more than 1 crores. We are constantly taking up the matter with HMEL. b)Implementation Timeline: As early as Possible c)Implementation responsibility: CM(M&C)/CM(F&A)


Annexure-I

( Loans & Adv Govt- TDS Certificate (IT) Received) lying open since 2008

Sl.No Assignment Document No Bus Area Posting Date Amounts(Rs.) Text

1 9207000020 RJ01 31.03.2008 2,757.00 TDS deducted by ONGC Ltd.

2 9207000021 RJ01 31.03.2008 5,151.00 TDS Deducted by ONGC Ltd.

3 Transfer Entry 2608006569 RJ01 01.10.2008 131,050.00 TE-OnCertificate Received for F Yr 07-08

4 Transfer Entry 2608006570 RJ01 01.10.2008 88,898.00 TE-OnCertificate Received for F Yr 07-08 frm560103

5 Transfer Entry 2608006571 RJ01 01.10.2008 173,772.00 TE-OnCertificate Received for F Yr 06-07 Frm560103

6 TDS Recieved 3309003985 RJ01 17.09.2009 6,621.00 TDS Cert Received from ONGC for FY08-09

7 TDS Recieved 3309004054 RJ01 18.09.2009 132,736.00 TDS Cert for FY 08-09(See Long Text)

8 TDS from ONGC 3309016655 RJ01 19.11.2009 11,037.00 TDS Received bill 400905-7 & 400918-20 on ONGC

9 TDS from ONGC 3309016657 RJ01 19.11.2009 10,835.00 TDS Received bill 400996-8 & 401001/3/4 on ONGC

10 TDS Recvd 3309031892 RJ01 31.03.2010 49,858.00 TDS Certificate received from Corp Bank

11 TDS Recvd 3310006624 RJ01 22.09.2010 20,398.10 TDS Received

12 TDS Recvd 3310006869 RJ01 30.09.2010 9,563.10 TDS Received from ONGC(100176)

13 2611000944 RJ01 17.05.2011 4,928.00 tds on tdr 1st quarter 2010-11 rcvd from corp bank

14 2611000944 RJ01 17.05.2011 13,794.00 tds on tdr 2nd quarter 2010-11 rcvd from corp bank

15 2611000944 RJ01 17.05.2011 14,872.00 tds on tdr 3rd quarter 2010-11 rcvd from corp bank

16 2611000944 RJ01 17.05.2011 9,708.00 tds on tdr 4thquarter 2010-11 rcvd from corp bank

17 TDS from ONGC 3311008941 RJ01 30.06.2011 49,636.00 TDS Received from ONGCL

18 4662 2611003033 RJ01 01.07.2011 1,745.00 tds on FDR int with dir petro, govt of rajasthan



21 tds -ongcl-sample 2611011381 RJ01 31.03.2012 16,545.00 tds certificate for11-12 recd from ongcl,transferd

22 3312003666 RJ01 20.06.2012 2,758.00 TDS CERTIFICATE FROM ONGC FOR 21.10.2011 RECEIPT

23 2612001863 RJ01 23.06.2012 78,641.00 certificate receivd from corp bank for 1qtr11-12




27 3312003846 RJ01 23.06.2012 11,030.00 tds certificate received from ongc on 08.06.2012

942,720.20


Loans and Adv Govt-TDS Cert (IT) Receivable-Others 560103

Sl.No Assignment Document No BusA

Posting Date Entry Date Amounts Text

1 2612002477 RJ01 30.06.2012 13.07.2012 68,493.00 tds amount on fdr with corp bank for 1st qtr

2 2612004935 RJ01 30.09.2012 11.10.2012 60,692.00 tds deducted on tdr with corporation bank

3 tds-ongcl-sample 2612005884 RJ01 20.11.2012 20.11.2012 14,045.00

tds deducted by ongcl on gas sampling billsapril12

4 2612007418 RJ01 31.12.2012 15.01.2013 46,084.00 3rd quarter tdr on TDR interest with corporation

5 2612009628 RJ01 31.03.2013 11.04.2013 25,281.00 tds deducted on sampling 24.01.13 -06.02.13 bill

Total 214,595.00


Follow-up of the previous Reports

Compliance Report of the Previous Internal Audit Observations up to Q4 of F.Y 2012-13

SRL

QUERIES REPLIES Current Status given by the project on 24.05.2014

1 Standard Operating Procedures for Materials Department is not available.

Standard Operating Procedures are centrally formulated at Duliajan. The matter will be referred to Duliajan for necessary action at their end.

Matter is being referred to Duliajan.

4 Segregation of duties has not been made in Materials Department.

This is not possible because of manpower constraints. Already Replied. May be deleted.

5 Physical Verification of Fixed Assets not carried out

Physical Verification of all Fixed Assets was last carried out in the FY 2005-06. As per the significant accounting policy of the company, next Physical Verification of Fixed Assets is required to be carried out in 2010-11. Necessary action has already been initiated to complete Physical Verification of all Fixed Assets in the FY 2010-11.

Facts have been stated.

9 High Ageing of Capital Goods in Transit

This is being carried forward from 2006-07 and remained unreconciled. Provision has been created against this item after consultation with Duliajan Accounts.

Action already taken. May be deleted.

15 SA documents are used for making Bank/Cash payments.

Different types of documents used in FICO are not of very significance excepting for reporting purposes. Neither Internal Control mechanism nor Internal Check mechanism is disturbed by using SA document for Bank/Cash payments. Nevertheless, necessary instructions have been issued to all concerned to desist from using SA document for Bank/Cash payments. Also, GM (ERP) has been requested to examine the issue and if possible to block Bank/Cash payment through SA documents.

Action by GM (ERP).We are not using SA document for bank/cash payments.

17

Outstanding dues recoverable from

GAIL of Rs. 17955984/-

The long pending amount of Rs.17955984.00 is because of a quality dispute involving RRVNUL which is yet to be resolved. Efforts are being made to resolve the same at the earliest.

Efforts are still on please.

23 Tax Related Review Late Deduction of

Tax Deducted at Source (TDS)

The same has been referred to Duliajan. Facts stated. May be deleted

30 Vehicle loans to employees The requisite documents will be obtained from concerned employees

Reply to be taken from Admin


34 Status of wells not known Accounting treatment for different wells is given strictly as per the Accounting Policy of the company. Since, however, this is controlled centrally at Duliajan actual position will be available at Duliajan. We have requested our Duliajan F & A Dept to furnish the actual position which will be forwarded on receipt the same from our Duliajan F & A Dept.

Reply awaited

38 Outstanding cash calls The amount indicated in the Internal Audit Report does not appear to be reconciled one. However, on receipt of Internal Audit Report, a comprehensive review and reconciliation of cash calls have been undertaken and after preliminary review, an amount of Rs. 4.00 Cr (Approx) has been found to be receivable from M/s GGR. It may be noted in this regard that M/s GGR raised certain issues which is under examination and is expected to be sorted out soon. In the mean while, the matter was taken up strongly with M/s GGR and the same is likely to be resolved soon. The issue of imposition of interest will be examined and addressed with respect to the whole gamut of the issue and appropriate decision will be taken in due course.

Matter is under arbitration.

39 Negligence & failure to exercise due

diligence in managing non-operated

block

1.It may be appreciated that, the status of the block is unknown the operator having received no response till date from DGH to its application for Rig Holidays. Since, there was no MWP and consequent no physical activity in the block, no expenditure was expected. As such audited accounts, though requisitioned, were not strongly insisted upon. However, the matter was taken up with M/s RIL at the time of finalization of quarterly accounts of OIL. Since there were no physical activities in the block there was no expenditure in the said block. Small value expenditures have been duly booked whenever statement of the same has been received from M/s RIL. The matter regarding audit of accounts, as suggested by audit, will be taken up with M/s RIL and the possibility obtaining audited accounts at this juncture will be explored. 2. It may please be noted that, there was no MWP for the block. Also no approval for Rig Holiday (for which M/s RIL has already approached DGH) was forthcoming as also there were no physical activities in the block. Hence, OIL has stopped approving the OCRs for appointment of auditors on the ground that, as there is

Internal audit to initiate action for auditing of the block in consultation with OC member.


no MWP, there should not be any expenditure and unless and until any official confirmation of the status of the block is received from MOPNG, no official activity in respect of the block can be resumed. Further, it was thought that once the approval is received, all the pending resolutions (including those relating to the appointment of auditors) in respect of the block may be taken up for consideration retrospectively. It is understood, that, the other partners have adopted the same view. In the meanwhile, OC resolution for appointment of auditors for the year 2008-09 has been sent to M/S RIL duly signed by OIL (copy enclosed). Efforts also were made on several occasions to elicit status of the

block from the operator. But no specific information could be

obtained. In the above said circumstances, it was felt prudent not

to accord approval for the OCRs for appointment of auditors in line

with that of the other partner. However, OCR for appointment of

auditors for the year 2010-11 has been approved by OIL even

though the other partner has not approved the said OCR for the

appointment of auditor and the same has been sent to RIL.

3. Expenditures were booked in OIL’s accounts until the date M/S RIL raised cash call on its partners recognizing it as liability.

Though OIL has raised this issue with M/S RIL on several

occasions M/S RIL replied that in the absence of any approval for

revival of the block, it’s of no use to raise further cash calls. The outstanding dues from Oil since May 2007 exists as OIL will

release dues only after receipt of approval of extended period of the

block from MOPNG.

4. As per the existing arrangement, ONGC is required to pay the

entire PEL fees of the block and OIL subsequently reimburses its

share of the PEL fees to ONGC. In this case, as the original

contract period has already expired and no information as regard

to the status of the block or payment of PEL Fees is forthcoming

from DGH, ONGC decided not to deposit PEL fees in respect of the


block in apprehension of the fact, that if the block has not been

given further extension, whole of the PEL fees will be a infructuous

as the same can not be recovered from the Ministry. Cash calls

and JIBs are discontinued because there is no physical work in the

block from April 2007 onwards and as such without any approval

of the expenditures in the absence of MWP, no cash call has been

released from OIL’s end.

The project is exploring the possibility of getting the audit of the

affairs of the block done through our Internal Audit Department

for which necessary action has already been initiated.

42 Sale of Natural Gas-Payment due on

debit note

The matter is being vigorously followed up with GAIL and is likely to be resolved soon.

Matter is still being pursued with GAIL.

45 Status: NELP BLOCK RJ-ONN-2005/2 Actions are in progress to complete the MWP before expiry of the Phase-1 period.

Facts have been stated.

48 Non-Operated Block GK-OSJ-03: Need

for urgent internal audit by OIL

Request has already been made to Internal Audit Department at Duliajan to make arrangements to conduct the audit of the Block We shall request ONGC to send us a copy of the internal audit report of the Block

Action by Internal audit department please.

50 Exploration Block GK-OSJ-03:

A detailed audit comment was

included in the Internal Audit Report

for quarter ending June, 2011 on the

status of this Block which is operated

by Reliance Industries Ltd with 60%

share and OIL and ONGC as non-

operators with 15% and 25% PI

respectively.

In terms of DGH letter dated

15.11.2011 addressed to RIL, the

following decisions have been taken in

We have already requested GM (Internal Audit) to take up the audit

of this block. However, we shall once again request him to take up

the task on top priority basis.

As far as cost of unfinished MWP is concerned, OC member has

already written to the operator to let us know the amount of our

share so that the same can be provided in our books of accounts.

Matter is being pursued regularly.

Action to be taken by internal audit cell.


respect of above Block.

1. MOPNG, in their letter dated 19.07.2010 to DGH, had not considered the Block for grant Rig Moratorium/Exploration Holiday and thus, the Block is relinquished.

2. In terms of Article 4.7 of the PSC, the Contractor had failed to fulfill the Minimum Work Programme within 60 days following the end of Phase-1 of the Block

3. The Contractor is advised to relinquish the block and pay the cost of unfinished MWP of Phase-1 along with interest as applicable under Article 4.7 of the PSC

Some important issues were raised by

audit on above

54 Outstanding Dues recoverable from

GAIL

It is seen from a review of statement of

accounts of GAIL that a sum of Rs.

9,15,42,973.45 was outstanding as on

31.12.2011.

It may be seen from above that the

sum of Rs. 1,04,89,760 has been

outstanding for more than four years

as on 31.12.2011. OIL, RP is unable to

produce any documentary evidence to

show that GAIL would make this

Matter shall be first discussed with the concerned authorities &

thereafter, proposal for writing off can be initiated to the approving

authority as suggested by the Auditors.

Matter is still pursued with GAIL


payment.

As there are no indications from GAIL

for payment of this claim, it is

suggested that the sum of Rs.

1,04,89,760 along with interest

accrued on this sum should be

written off with competent authority’s approval as same is outstanding for

more than three years since creation

of provision of this amount.

58 Liability Provision for Crop

Compensation:

A sum of Rs. 39,405,765.75 was

provided in 2009 towards Crop and

other related compensation in respect

of following JV Blocks:

RJ-ONN-2000/1

RJ-ONN-2001/1

RJ-ONN-2002/1

RJ-ONN-2004/2

RJ-ONN-2004/3

Baghewala

Current status of the dispute with M/s

GT, Poland along with reasons for

continuing with this provision may

please intimated to audit.

As you are aware that resolution of the dispute through OEC is currently in progress & the last meeting with OEC was held on May 31st May at New Delhi. As advised by OEC, scrutiny of the 77,000 PAF forms will be

carried out by outsourcing the services from at least two vendors

to ascertain the admissibility of the forms submitted by M/S GT

for reimbursement.

Please note that tender has been floated for awarding the job &

bids shall be opened on 22nd June,2012. Thereafter, LOI shall be

issued to the lowest bidders & job shall commence. We are

expecting to complete the job by August end so that the results

can be apprised to OEC in the meeting to be held with them in

September second/third week.

OEC has already given the judgment and the same has been implemented. May be deleted.


59 Outstanding Dues recoverable from

GAIL:

A sum of Rs.1,79,55,984 is

outstanding from GAIL as given below.

It is seen that a sum of Rs.

1,04,89,760 has been outstanding for

more than four years as on

31.03.2012. OIL, RP is unable to

produce any documentary evidence to

show that GAIL would make this

payment. In response to an audit

query raised in Internal Audit Report

for quarter ending 31.12.2011, OIL

replied as under:

Quote:

Matter shall be first discussed with the

concerned authorities & thereafter,

proposal for writing off can be initiated

to the approving authority as

suggested by the auditors:

Unquote

It may please be stated whether the

above matter was discussed with

concerned authorities and if so, the

outcome may please be intimated to

audit. Also, proposal, if any, for the

write off of the amount in FY 2011-12

may also be informed to audit. In the

opinion of audit, the aforesaid dues

Proposal for write off is yet to be submitted to the Management.

Matter may be pursued with Corporate office.


are unlikely to be settled by GAIL.

64 Adoption of Audited Accounts:

Block RJ-ONN-2004/3:

It is seen from HPCL letter dated 16th

November, 2011 that the adoption of

Audited Accounts of Block RJ-ONN-

2004/3 is pending from FY 2007-08 to

FY 2010-11.

In terms of 25.4.3 of PSC, the

contractor shall submit the audited

accounts to the Management

Committee for approval within 60 days

from the end of the year. The

Management Committee shall consider

and approve the auditor’s report within 30 days after submission of

such report.

Similarly the adoption of Audited

Accounts of Block RJ-ONN-2004/2 is

also pending from FY 2007-08 to FY

2010-11.

The compliance of above requirement

of PSC may have to be checked by OIL,

RP for the above mentioned Blocks

and also for other blocks as well and

duly approved copies may have to be

furnished to the JV Partners and DGH

All the accounts for the period 2007-08 to 2010-11 have been

forwarded to MC for adoption & same is awaited. There have been

some queries on the accounts which are being replied. OC member

is taking up the matter with DGH.

Variance analysis has also been sent to partners/DGH.

Status is same please.


within the time limit prescribed.

66 Supply, Installation and

Commissioning of Interior &

Furniture for OIL House, Jodhpur:

Contract No. 6106222

The above contract was awarded to the

L1 bidder M/s S. G. Engineering Co

for the supply, installation and

commissioning of Interior and

Furniture at OIL House, Jodhpur vide

LOA Dated 09.01.2012 for a total

contract value of Rs. 1,81,92,540.

As per clause 2.2 of the Contract, the

contractor must complete the job in all

respects within 120 days from the

issue of LOA, failing which liquidated

damages at the rate of 0.5% of the

total contract value for delay of each

week or part thereof subject to

maximum of 7.5% will apply.

The job must have been completed in

all respects on or before 08.05.2012.

In terms of OIL, RP letter dated

15.05.2012 to the contractor, lot of

jobs are yet to be completed and even

first floor was not completed. It was

also stated that the contractor was

found to be out of reach condition due

to switch off condition of his mobile.

The contractor was further reminded

Interior jobs are now progressing along with activities of other

module jobs. It may please be noted that all the modules are inter-

dependent on each other & delay may occur in one particular

module due to other module activity which is yet to be completed.

Presently, contractor is likely to complete the job shortly. However,

as delay has already occurred, penalty as per contractual

stipulations will be levied. Meanwhile, contractor has written a

letter explaining the situation under which delay has occurred &

requested for the waiver of the LD which will be dealt with

separately as per merit.

No impact on accounts


in letter dated 03.07.2012 but no reply

appears to have been received from the

party.

The delay in the completion of above

work has a wider ramification in terms

of additional financial burden by way

of payments of lease rents of all OIL

premises.

OIL, RP should, therefore, endeavour

to get the job completed by the

contractor at the earliest and arrange

to recover the applicable LD from the

Contractor.

68 Non-Payment/Adjustment of

Provisions:

A sum of Rs. 1,972,713,691.43 is

provided under GL code 211225

towards cost of unfinished MWP of

Blocks RJ-ONN-2004/2, RJ-ONN-

2004/3 and provision for CWIP

(Development Well) (LOC-RBS) as on

date (25.10.2012)

A total provision of Rs. 118.13 Cr was

made for cost of unfinished MWP of

Block 2004/2 as on 30.09.2011. The

payment of cost of unfinished MWP

should be expedited. As per DGH letter

dated 3rd July, 2012, OIL is to provide

100% bank guarantee and 10% cash

payment as agreed pre estimated

Provisions were taken long back when the parameters of the work

programs were different and the rate of services were also

different. With the rig cost and wireline logging cost came down,

these provisions will be required to be adjusted accordingly. LD for

block RJ-ONN-2004/3 have been paid on provisional basis. Once

the approved LD amount is received by OIL from DGH, adjustment

in provisions will be done.

Provisions for the block RJ-ONN-2004/2 was also calculated in the

same way. But it seems that no BG is required to be deposited now

to DGH on account of relinquishment as OIL has requested for

extension of the block on the basis of discovery of hydrocarbons.

The same has not been approved yet by DGH. Once the same is

approved, these provisions will require to be adjusted.

May be deleted as the same point is appearing later in the reports.


liquidated damages for the unfinished

minimum work programme so as to

fulfill provisions of extension policy A-

1.

The entire provision account needs to

be examined again in the light of above

and excess provision, if any, needs to

be adjusted.

72 NON-PAYMENT/ADJUSTMENT OF

PROVISIONS:

A total provision of Rs. 118.13 Cr was

made for cost of unfinished MWP of

Block 2004/2 as on 30.09.2011. As

per DGH letter dated 3rd July, 2012,

OIL is to provide 100% bank guarantee

and 10% cash payment as agreed pre

estimated liquidated damages for the

unfinished minimum work programme

so as to fulfill provisions of extension

policy A-1.

In reply to above query raised during

audit of accounts for quarter ending

30.09.2012, the Management had

stated as under: Quote:

But it seems that no BG is required to

be deposited now to DGH on account

of relinquishment as OIL has

requested for extension of the block on

the basis of discovery of

OIL has submitted the BG for the differential amount of USD

23,06,429 on 30.01.2013 with DGH. BG for the additional work

programme for USD 33,000.00 has also been furnished to DGH on

30.01.2013.

Reg. GGR share of BG for USD 26,90,973, we have ,once again,

written to them to deposit the BG along with BG of USD 11000.00

for additional work programme.DGH has also taken up the matter

with GGR for non submission of BG.

Meanwhile, we are also taking up with the apex management,

through E&D & CEMG group, to explore the possibilities of taking

over the GGR PI of 25% in block RJ-ONN-2004/2 as this is a

discovery block & we can not afford to loose the block.

Auditor has also expressed his concern about relinquishment of

the block by DGH of this discovery block, in case, BG is not

submitted by GGR which is quite clearly understood but situation

is beyond our control as all out efforts to convince GGR to submit

BG to DGH have not been fruitful.. BG has also not been

BGs have been submitted by OIL on behalf of GGR on request of DGH. Reg. cash calls, matter is under arbitration. This point may be deleted as the same is appearing in current reports also.


hydrocarbons.Unquote:

But, DGH, in their letter dated

12.12.2012, advised OIL, RP to fulfill

the following at the earliest, prior to

consideration of proposal of 2nd

extension applied by OIL, RP.

1. OIL has submitted BG for lesser amount of USD 2,306,429 in respect of unfinished MWP

2. GGR is yet to submit BG for an amount of of USD 2,690,973 towards their share of the unfinished work programme of Phase-I

3. OIL and GGR are required to submit BG for additional work programme proposed by the Operator.

4. In case of non submission of above BGs, the extension proposal will not be taken up for consideration and the block will be treated as relinquished with effect from 21.07.2012. In that case the contractor will be required to deposit cost of unfinished MWP as on 21.07.2012.

In view of aforesaid letter of DGH,

following audit queries are raised:

1. Whether OIL, RP has since submitted the BG for the full amount of unfinished Work Programme of Phase-I?

2. Action taken to persuade GGR

submitted by GGR despite vigorous persuasion by DGH/OIL till

date.


to submit BG of USD 2,690,973 towards their share of unfinished work programme of Phase-I.

3. Whether BG for additional work programme has been submitted by OIL, RP and GGR

As huge amounts of cash calls are still

not paid by GGR yet for this Block, the

submission of BGs by GGR is unlikely

and it will jeopardize the approval of

extension proposal of this Block,

where there has been a discovery of

Hydrocarbon.

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Internal Audit Report Rajasthan Project - Oil India...Jaisalmer Basin 239.381 203.579 205.260...

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Transcript of Internal Audit Report Rajasthan Project - Oil India...Jaisalmer Basin 239.381 203.579 205.260...