New Delhi: Preliminary findings of the Comptroller and Auditor General (CAG) show discrepancies in award of contracts related to Panna/Mukta and Tapti oil and gas fields by a consortium-led by the UK's BG Group, reports PTI.

The Audit and Accounts Department of CAG sent its preliminary findings to the oil ministry last month and has also asked the consortium of BG Group, Reliance Industries (RIL) and Oil and Natural Gas Corporation (ONGC) to reply on the audit observations, sources in know of the development said.

Once the BG-Reliance-ONGC consortium replies to audit objections, CAG will prepare a proper report and submit it to the oil ministry for comments. Upon receipt of comments from oil ministry, CAG will then finalise its audit report.

A spokesperson for BG Group, which is responsible for contracting in the three-way consortium, declined comments.

BG and Reliance have 30% interest each in the Panna/Mukta oil and gas fields and Tapti gas fields lying in western offshore. The remaining 40% is with ONGC.

Sources said CAG, in its preliminary observations, found that the joint venture awarded 17 contracts for drilling services without openly advertising for pre-qualification of companies during 2003-04/2004-05 and thru 2008-09.

It is mandatory for oil companies to publish/advertise invitation for parties to pre-qualify for any contract worth over $3 million.

The Panna/Mukta and Tapti joint venture awarded third party drilling services contracts to companies such as BJ Services (a Baker Hughes subsidiary), Weatherford, MI Overseas and Schlumberger without following this procedure, sources said quoting CAG's observations.

Also, the consortium procured more inventory than necessary for operations of the fields by not accounting for reusable items in the inventory stock.

CAG also stated that BG-Reliance-ONGC had blindly agreed to pay higher rates to rig and drilling service contracts after expiry of original contracts. The joint venture did not determine competitive market rates, which were actually lower these contracts, when extending these contracts.

Sources said CAG found serious lapses in execution of the New Revised Plan of Development (NRPOD) project to maintain plateau of South Tapti and development of Mid-Tapti gas fields.

The joint venture incurred an extra expenditure of $28.41 million after it failed to award contract to lowest bidder, J Ray McDermott on a turnkey basis, they said.

Panna/Mukta and Tapti field was one of the three private sector operator oil and gas fields for which oil ministry had sought a special audit. The other fields being audited are Cairn India's Rajasthan oil fields and RIL’s eastern offshore KG-D6 gas fields.

According to the CAG report, J Ray McDermott had quoted $300.77 million for doing the job but when the award of contract was delayed, it demanded a $15 million acceleration in cost and a performance incentive of another $15 million.

The joint venture rejected McDermott's quote and decided to executive the project by splitting the work into different packages, a move that eventually saw project cost climb to $428.18 million as against a total of $399.77 million estimated through the turnkey route.