Oil minister rules out upstream oil gas regulator

7. Anadarko Petroleum | Fine: Rs 33,477 crore | The firm tried to avoid paying fines for environmental contamination.

Oil Minister Dharmendra Pradhan today virtually ruled out giving statutory powers to upstream oil and gas regulator DGH, saying the sector has not fully developed and needs government support.

There are two regulatory bodies in the oil and gas sector - the Petroleum and Natural Gas Regulatory Board, which is a regulator for the downstream activities like laying of pipelines and fuel marketing but without powers to review pricing.

The Directorate General of Hydrocarbons (DGH) is a technical arm of the oil ministry which overseas upstream oil and gas exploration and production activities.

Various committees have suggested creation of an independent, statutory regulator for the upstream oil sector.

At a seminar organised by FICCI, McKinsey in a presentation reiterated the demand, calling for DGH to be made a statutory body like market regulator Sebi.

Responding to this, Pradhan said the sector has not developed fully and still looks at the government for reforms.

"Does a sector which has not developed fully, a sector which expects government to do reforms, should be talk of that," he said.

He said it was not right to put "jargons" like statutory regulator for the sector.

In 2013, a committee, headed by former finance secretary Vijay Kelkar, had recommended hiving off the DGH's financial oversight function and vesting it with the income tax authorities.

It recommended that the ministry and the DGH should restrict themselves to the technical oversight of contractors.

The DGH currently manages petroleum resources besides monitoring production sharing contracts (PSCs), and assists the government in auctioning oil and gas exploration fields.

It is manned by staff drawn on deputation or tenure basis, mainly from state-owned firms like ONGC and OIL.

Kelkar panel had stated that "DGH needs to create an HR pool by hiring the best talents."

Parliamentary standing committees too have recommended an independent upstream regulator.

In 2011, a panel led by former finance secretary Ashok Chawla advised the government to turn the DGH into an 'independent technical office' attached to the oil ministry and establish an upstream regulator to focus on regulatory functions.

It also said the reconstituted DGH as well as the regulator must not have staff on deputation from regulated firms.

A similar panel had in 2001 recommended the setting up of an Upstream Hydrocarbon Regulatory Board, giving DGH a techno-administrative role as a part of the oil ministry.

The government's recent Integrated Energy Policy noted that the present upstream regulation provided by the DGH was "neither independent nor comprehensive in a technical sense" and the "current arrangement needs to be strengthened and made independent".