STRENGTHENING ETHICAL CORPORATE GOVERNANCE IN OIL, GAS AND PETROCHEMICAL SECTOR IN INDIA & OFF-SHORE

2 Strengthening Ethical Corporate Governance in Oil, Gas and Petrochemical Sector in India & Off-shore
AGENDA FOR CONSULTAION

Strengthening Ethical Corporate Governance in Oil, Gas and Petrochemical Sector in India & Off-shore 3
INTRODUCTION
TheGlobalCompactLeaders’Sum-
mit - 24 June 2004, UN Headquar-
ters, chaired by Secretary-General
Kofi Annan, assembled hundreds of
corporate executives, government
officials and civil society leaders at
UN headquarters to take stock of
the Global Compact and chart its
future course. After extensive dis-
cussions with the participants, the
Secretary-General announced the
adoption of a tenth Global Compact
principle "Businesses should work
against corruption in all its forms,
including corruption and bribery”.
Since 2011, Global Compact Net-
work India, through its flagship
‘Collective Action Project – a UNGC
Siemens Integrity Initiative’ was
instrumental in bringing a diverse
group of stakeholders on a com-
mon platform, facilitate discussions
on issues related to corruption
and explore solutions to curb graft
over a four year period from 2011-
2015. Simultaneously, since 2013,
under the “Strengthen Ethical and
Transparent Corporate Governance
Project”, a part of the UK Prosper-
ity Fund India Programme, GCNI
consolidated its achievements from
the earlier project and focused on
strengthening ethical corporate
governance in India.
Both the above mentioned pro-
jects helped GCNI to understand
the anti-corruption landscape of the
country and the areas of governance
which needed work. Incorporating
feedback and recommendations
of stakeholders, GCNI released a
White Paper on “Strengthening Eth-
ical Corporate Governance” at the
event which presented International
frameworks & Indian Policy regime
on Corporate Governance, Chal-
lenges of Ethical Business Conduct in
India and focused recommendations.
The proceedings for the day were
started by Ms. Shabnam Siddiqui,
Project Director, Global Compact
Network India. Ms. Siddiqui briefly
spoke about the journey of Global
Compact Network India from
implementing nine principles of
UNGC on three basic themes of
human rights, women principles
and environment to adoption of the
10th principle on Anti-Corruption
and furthering the agenda of clean
business operations.
Ms. Shabnam Siddiqui, Project Director,
Global Compact Network India

WELCOME SESSION
The welcome session was hosted
by Ms. Jatinder Peters, Secretary,
Petrotech. Ms. Peters welcomed
the gathering, shared the layout for
the day as well as introduced the
dignitaries of the Welcome Panel.
Dr. Uddesh Kohli, Senior Advi-
sor, UN Gobal Compact, welcomed
stakeholders to the National Con-
sultation on Strengthening Ethical
Corporate Governance in Oil and
Gas Sector in India and Off Shore.
He spoke about the merits of ethical
corporate governance and quoted
the example of TATAs, who are well
known for their ethical conduct.
He proposed that the consultation
should look at what has been done
so far and what should be the future
course of action viz a viz a more
transparent governance of the oil
and gas industry. He suggested that
new ideas and initiatives should be
explored with the aim to benefit the
society at large.
Ms. Claire Tynte-Irvine, Head,
Prosperity, Economic and Trade
Policy, British High Commission,
shared her thoughts on Trade, Tax
and Transparency, which are key to
improve the global economy. Cor-
ruption exists across businesses,
government and among citizens,
which affects taxes. She said that
British High Commission is working
closely with a number of interna-
tional partners on international tax
agenda. Ms. Tynte-Irvine cited that
corruption evades trust between
businesses, society and nations.
An estimate on the annual cost
imposed by corruption accounts up
to 5% of Global GDP, 25% of the total
cost of procurement in developing
countries and 18-29% of business
costs globally. Apart from financial
costs, the reputational cost are also
very high - corruptiopn cannot be
ignored. Transparency is critical in
handling corruption & it is important
that a platform for collaboration with
stakeholders and building public
pressure is nurtured to tackle graft.
Ms. Jatinder Peters, Secretary, Petrotech, hosting the welcome session
Dr. Uddesh Kohli, Senior Advisor, UN
Global Compact
Ms. Claire Tynte-Irvine, Head,
Prosperity, Economic and Trade Policy,
British High Commission

Ms. Tynte-Irvine further mentioned
that one of the important steps
taken by UK is the introduction of
the Anti-bribery Act in 2010 which
looks at cross territorial application
by imposing penalties on UK compa-
nies, irrespective of their geograph-
ical location of operations. With an
aim to propagate clean business
and endorse international guide-
lines such as UNGC’s Principle 10,
UK has also built an anti-corrup-
tion portal. The government of UK
has published a national plan which
describes ways to tackle graft within
the country and abroad.
Ms. Tynte-Irvine emphasized that
since corruption incurs a cost on
businesses, companies can bene-
fit by acting together to prevent and
tackle corruption. One way of doing
this would be to look at sector spe-
cific corruption. In 2012, an extensive
research was done on corruption
cases investigated in 2006. The data
had around 50 cases of graft reported
of companies in the Oil and Gas sec-
tor. The report suggested that Oil and
Gas sector does not have an adequate
internal structure and complaint sys-
tem, which makes this sector vulner-
able to corruption. She applauded
the initiative of GCNI and Petrotech in
putting together this consultation and
getting experts from the Oil and Gas
industry to deliberate upon pressing
issues of the sector.
White Paper on
Strengthening Ethical
Corporate Governance
was launched at the
Welcome session
Dr. A. K. Balyan, Managing Direc-
tor & CEO of Petronet LNG Limited,
began his address by saying that
there were times when companies
were known for their products and
services, but now companies are
recognized for ethical conduct. He
raised a very pertinent question –
How do you really then bring about
such a transformation?
Apart from the CEO, the top man-
agement can play a pivotal role
in bringing about transparency in
business operations. Leadership
companies are one which have pool
of leaders who do not shy away
from decision making. In leader-
ship companies, leaders are open
to discussions hence decisions are
better, well debated and therefore
there is transparency in decision
making. Companies these days are
no longer driven by one man. Citing
an example of such a transforma-
White Paper launch on Strengthening
Ethical Corporate Governance during the
Welcome Session
ALL THE LEADERS
MUST HAVE ONE
COMMON AGENDA
– STRIVE TOWARDS
ETHICAL WORKING OF
THE ORGANIZATION.
THEY SHOULD BE ON
A CONSTANT LOOK-
OUT FOR BEST PRAC-
TICES TO IMPROVE
THE ORGANIZATIONS
FUNCTIONALITIES”
- DR. A. K. BALYAN, MD & CEO,
PETRONET LNG LIMITED

tion in ONGC, Dr. Balyan spoke at
length about the company’s suc-
cess of decentralization of author-
ity. At one point of time, financial
and other important decisions were
taken solely by the CEO, a top-down
approach. But, at present, Project
Heads take project and department
related decisions and have adopted
a bottoms up approach – a land-
mark change for a public sector
undertaking. For such decentrali-
zation there is always resistance in
the beginning. The key to overcome
such resistance is debate on policy
matters and putting forth recom-
mendations on improving systems
and procedures for better quality
and time utilization. Giving away
power is not easy but there are
three parameters which all lead-
ership companies should follow in
order to bring about this change.
Firstly, all the leaders must have one
common agenda – strive towards
ethical working of the organization.
They should be on a constant look-
out for best practices to improve the
organization’s functionalities.
Secondly, how do you bring about
transparency in all aspects of work-
ing? Quoting the example of ONGC
he said in the past transfers were
considered a tool of punishment,
the organization was not gaining
respect and faith from the employ-
ees. When Dr. Balyan took on the
mantle of Director – HR he pro-
posed a new transfer and job rota-
tion policy. The proposed policy was
discussed and debated and within a
year a new policy was introduced.
The transfers were put on notice
boards and a mandatory rural post-
ing was framed as a policy. This
brought in a change in the mindset
of the employees and they became
more contributing to the organiza-
tion.
Thirdly, he focused on develop-
ing customer – loyalty towards the
organization. He illustrated through
an example, a Spanish company
manufacturer of edible oil called
back an entire batch of its prod-
ucts as they had a slight change in
the proportion of ingredients. The
company announced that in case of
any health issue faced by the clients
the organization will be liable to
pay the treatment cost. There were
no issues reported, but this public
announcement enhanced the repu-
tation of the company.
Dr. Balyan concluded by saying that
in the last 15 years, there has been a
drastic change in the oil and gas sec-
tor. Currently India is moving towards
becoming a refining hub, petro-
chemicals is one such area which is
gaining momentum. This sector is
investment intensive and hence it is
important for the companies to know
about international practices (pro-
Dr. A. K. Balyan, Managing Director &
CEO of Petronet LNG Limited
Mr. Ashok Anand, Director General,
Petrotech
THERE IS A NEED
FOR THE CORPORATE
SECTOR TO REALIZE
THAT THERE CAN BE
NO COMPROMISE AND
NO SHORTCUTS TO
SUCCESS”
- MR. ASHOK ANAND, DIRECTOR
GENERAL, PETROTECH
cesses). Debates and discussions
should be held while formulating pol-
icies. One of the policies worth dis-
cussing is giving equal opportunities
to PSUs and foreign players.
Mr. Ashok Anand, Director Gen-
eral, Petrotech, concluded the inau-
gural session by saying that there is
a need for the corporate sector to
realize that there can be no com-
promise and no shortcuts to suc-
cess. India imports almost 80% of
its crude oil from other countries
and the demand is set to increase.
If the country wants to progress it
requires energy, energy requires
money and there could be no other
sector than oil and gas sector which
has money.
There are existing compliance prac-
tices in the oil and gas sector, these
policies and practices need to be
enhanced to match and fully com-
ply with UNGC’s Principle 10 on
Anti-Corruption. He concluded by
reporting a case of Jessica Harper, a
former Lloyds bank worker who was
jailed for five years for a £2.4 mil-
lion fraud. She committed this fraud
while she was heading the fraud and
security for digital banking at the
company. Mr. Anand said that there
were two important takeaways from
this case – why do good employees
become so bad when it comes to
money and why did such a big bank
take four years to unveil the scam.

Ms. Claire Tynte-Irvine set the
tone of the session by putting forth
the issues to be deliberated by the
panelist. She said that the focus
of the session would be on under-
standing the compliance policies,
culture of transparency within a
company and room for peer learn-
ing among the Oil and Gas compa-
nies. Oil and Gas sector has a huge
impact on the environment. How a
company addresses the environ-
mental issues, goes a long way in
creating its brand image. She gave
the example of British Petroleum
(BP). BP was accused of Oil spill
in the American waters which led
to environmental disaster and the
company gained negative public-
ity. It was an uphill task for BP to
change its image from a company
accused of creating environmental
disaster to a responsible company.
PANEL DISCUSSION
NATIONAL & INTERNATIONAL COMPLIANCE
POLICIES AND PRACTICES OF OIL, GAS AND
PETROCHEMICAL SECTOR
Ms. Tynte-Irvine raised vital ques-
tions pertaining to complex nature of
the sector and accountability aspects
of the organization; how do oil and
gas companies see corporate gov-
ernance, is it merely a legal matter
or is it about compliance? With the
government trying to attract Foreign
Direct Investment (FDI) in the oil and
gas sector what are the kind of cor-
porate governance issues that comes
with new partners, new entrants and
new culture? With the addition of
Shale oil into the market by U.S com-
panies, how are Indian companies
going to handle the competition?
Dr. A. K. Balyan said that there is
tremendous pressure on the Oil
industry as the sector is infested
with high volatility and uncertainty.
The investments are huge along
with long gestation periods, making
(Left-Right) Mr. Arun Kumar Jain, Dr. A. K. Balyan, Ms. Claire Tynte-Irvine and Mr. Alok Mishra
OIL AND GAS SECTOR
HAS A HUGE IMPACT
ON THE ENVIRON-
MENT. HOW A COM-
PANY ADDRESSES
THE ENVIRONMENTAL
ISSUES, GOES A LONG
WAY IN CREATING ITS
BRAND IMAGE”
- MS. CLAIRE TYNTE-IRVINE,
HEAD, PROSPERITY, ECONOMIC
AND TRADE POLICY, BRITISH HIGH
COMMISSION

the sector prone to corruption. Cur-
rently, there is an unprecedented fall
in the crude oil prices. With the fall
of price to about USD 50 per barrel,
one wonders why crude oil was once
sold at USD 100 / barrel. If countries
can sustain at USD 50-60/ barrel,
with the fundamentals of demand
and supply theory one tends to think
that there was something wrong
within the sector when crude oil was
selling at USD 100/ barrel. However,
the rules of the games in Oil and Gas
are totally different.
Liquefied Natural Gas is another
sector which is unique and complex
to understand. The world is divided
into 3-4 segments with different
prices prevailing in each segment.
The Indian economy imports 80%
of its Oil and Gas needs, no price
regime can give a favorable bargain
to such huge requirement.
If a company is doing fairly well, it
is slightly easy for them to adopt
transparent business practices but
a company which is not able to sus-
tain itself, getting business becomes
the prime goal and transparency
is secondary. The management of
such companies is under tremen-
dous pressure to get business, the
end result matters more than the
means. Some of the challenges of
the Oil and Gas Sector are:-
1) Pressure on the profits of the
companies as compared to the
finances invested.
2) Pressure of disclosing the assets
of the company. Example com-
panies do not like disclosing the
oil reserves and the quantum
of exploration expected. How-
ever companies who do that are
regarded high on ethics.
3) How do you sustain in the volatile
business environment where
the regulatory mechanism is
changing. How do you keep
company practices at par with
the international standards when
the operations are geographical
spread and some geographies
face difficult political and
economic situations.
4). Public Private Partnership Model
in such an investment intensive
industry.
Dr. Balyan concluded by saying that
the oil and gas sector has received
the highest FDI in the country in the
last decade and is poised to secure
more investment. The projected
growth of the refining sector is 250
million tones with petro products
becoming prominent exports for the
country, along with development
of petrochemical complexes. This
aggressive growth scenario has put
the oil and gas companies under tre-
mendous pressure. However com-
panies should not compromise on
ethics in their business operations.
Mr. Arun Kumar Jain, MD, Fluor
Daniel India Private Limited, pro-
vided insight on some practical
measures, policies and business
standards followed by Fluor Daniel.
He spoke briefly about the company
and outlined that around two-third
of their business worldwide and
95% of their business in India is
related to oil and gas sector. A cli-
ent survey conducted by Fluor sug-
gested that clients perceive Fluor to
be an ethical organization. Some of
the values which are integrated in
the operations of Fluor are integrity,
safety, quality and excellence. The
company has a well-drawn code
of business ethics for all its stake-
holders; clients, third parties and
vendors.
In India, Health, Safety & Environ-
ment (HSE) is vital for companies
working in 3rd party contracts. Fluor
has measures to ensure safety
and health of the environment and
workers. Quoting an example Mr.
Jain said that in India diesel drums
on the road side is a common occur-
rence but with contracts in which
Fluor is involved there no drum or
any unnecessary obstruction found
on the roads. Fluor has an image of
being environmentally responsible.
Mr. Arun Kumar Jain, MD, Fluor Daniel
India Private Limited
IF A COMPANY IS
DOING FAIRLY WELL,
IT IS SLIGHTLY EASY
FOR THEM TO ADOPT
TRANSPARENT BUSI-
NESS PRACTICES BUT
A COMPANY WHICH
IS NOT ABLE TO SUS-
TAIN ITSELF, GETTING
BUSINESS BECOMES
THE PRIME GOAL AND
TRANSPARENCY SEC-
ONDARY”
- DR. A. K. BALYAN, MD & CEO OF
PETRONET LNG LIMITED
Weeding out issues of child labor,
forced labor, data theft, work place
harassment are keys to ethical
conduct. Treating workers with
respect and conducting operations
in non-discriminatory manner is in
the DNA of Fluor.
Mr. Jain emphasized that financial
and operational controls are
important aspects of ethical
corporate governance. Fluor
demands accurate, fair, timely and

transparent books of accounts from
their contractors. There are certain
business related information which
should not go public as they could
be used for bid rigging and insider
trading. To ensure that there is no
foul play in the bidding process,
Fluor has clear guidelines towards
zero tolerance to corruption. Fluor
has a ‘Code of Business Conduct
and Ethics” in which receipt of a gift
should fall under four guidelines
enlisted under its code of ethics and
should not unduly affect business
decision. Fluor has a limit on 3rd
party agents that they employ to get
contracts.
Finally money laundering is a press-
ing issue in contracts related to the
Oil and Gas sector. To counter money
laundering Fluor has a strict policy of
no cash in business transactions. Mr.
Jain concluded by saying that com-
peting fairly is the most essential
aspect of ethical governance.
Mr. Alok Mishra, Company Secre-
tary, Mahanagar Gas Limited, gave
a broad perspective about corporate
governance and defined corporate
governance as application of best
management practices, compli-
ance with law and adherence to
ethical standards. Corporate gov-
ernance could lead to equitable dis-
tribution of wealth and discharge of
social responsibility for sustainable
development of all stakeholders.
The ultimate objective is twofold:
a) Enhancement of the value in the
hands of the stakeholders and b)
operating within the legal frame-
work for sustainable development.
Corporate governance is a self –
integrated process. Some of the
essential pillars are transpar-
ency, accountability, adherence
to law, trust, fairness and equity.
Mr. Mishra raised a very pertinent
question of who is responsible for
propagating corporate governance.
Corporate governance is generally
the responsibility of the owners and
administrators, who connect the
various stakeholders of the busi-
ness such as suppliers, customers,
lenders, employees and regulators.
Further, Board of Directors should
have the knowledge, experience,
integrity, team spirit, positive atti-
tude, power to motivate, willing-
ness to learn, intention to provide
complete information and capacity
of decision making, guide and steer
the team which could aid in adopting
corporate governance. There should
be freedom to voice opinions, ability
to demonstrate and perform and
willingness to be evaluated.
Mr. Mishra said that along with
thinking about growth it is impor-
tant to mitigate risks. Businesses
require three things to sustain in
the market; to compete for quality
Mr. Alok Mishra, Company Secretary,
Mahanagar Gas Limited
and place, to allow others to play
the game fairly and honestly and pay
taxes for the benefit of the society.
Mr. Mishra concluded by saying
“Corporate Governance is a journey
not destination. Start now. Tomor-
row will be too late”.
On a question from a participant
as to how does one ensure that all
suppliers are adhering to transpar-
ency values, Mr. Jain said that from
the point of view of a subcontractor,
price is not the only indicator. There
are certain prequalification proto-
cols to be adhered to and companies
need to do periodic social conduct
audits as well as covers policies.
Dr. Balyan added that vendors
should be given adequate informa-
tion about contract period, bidding
cost etc. Annual meets with the ven-
dors should be held. When Integrity
Pact was introduced it brought in a
landmark change for the contractor
and seller that they could approach a
neutral forum of independent moni-
tors. This brought in a lot respect,
transparency and comfort and facili-
tated in taking timely decisions.
In Conclusion
Mr. Arun Kumar Jain sharing expe-
riences from Fluor’s recently com-
pleted project in Dahej, India said
that in Oil and Gas sector, as with
other industries, human resource
development should be viewed as
an important aspect for industrial
success.
Dr. Balyan gave another example
wherein construction of an LNG
terminal at Kochi, that was ready
to supply 5mmt of gas, got delayed
due to absence of pipelines. He said
that clear guidelines go a long way
in positively impacting the function-
ing of the project.
Mr. Mishra said that corporate gov-
ernance can only be adhered to by
companies when all the stakehold-
ers wish to follow it.
CORPORATE
GOVERNANCE IS
A JOURNEY NOT
DESTINATION. START
NOW. TOMORROW
WILL BE TOO LATE”
- MR. ALOK MISHRA, COMPANY
SECRETARY, MAHANAGAR GAS
LIMITED

BREAKOUT SESSION - I
CHALLENGES, GOOD PRACTICES,
RECOMMENDATIONS AROUND ALLOCATION/
EXPLORATION AND SUPPLY CHAIN
Ms. Jot Prakash Kaur, Research
Officer, GCNI, hosted the breakout
sessions and introduced the subject
experts
Allocation and
Exploration
Mr. A. K. Dwivedi, Director Explo-
ration, ONGC, gave a brief back-
ground of Indian Oil and Gas sector
citing that since independence this
sector has been dominated by state
runs units and nothing much has
changed on the domestic front till
date. The national companies play
a vital role in exploration and pro-
duction, such as ONGC, Indian Oil,
among others. Through the efforts
of national oil companies, sedimen-
tary area basin of more than 3 lakh
km was covered for exploration. To
make exploration and production
cost effective and competitive, pol-
icy change was required. This led to
the introduction of New Exploration
Licensing Policy (NELP), that laid
guidelines on allocation of blocks
to companies for service contracts.
NELP1 came in 1999 with an idea
to offer competition and its major
objective was to enhance Explo-
ration & Production. Initially there
was apprehension as there was
fear of failure of the policy due to
monopolistic nature of the market.
NELP1 encouraged foreign oil and
gas companies to compete. With
each revised NELP (from NELP1-
NELP6) the private sector participa-
tion increased. But between NELP 7
and NELP 9 the participation of the
private companies decreased. This
did not deter the government to for-
mulate NELP 10, as it was targeting
Ms. Jot Prakash Kaur, Research Officer,
GCNI
(Left-Right) Mr. Anil Sachan, Mr. A. K.
Dwivedi and Mr. Nitin Banerjee

towards laying guidelines for alloca-
tion of acreages.
Mr. Dwivedi listed some of the chal-
lenges in the exploration segment
of oil and gas sector. To ensure
transparency in allocations – inter-
est of owner, government and pri-
vate companies, who are the major
stakeholders in businesses and role
and governance structure of the
regulator should be carefully scru-
tinized. Mr. Dwivedi said that a reg-
ulator should be progressive (solu-
tion oriented) due to high stakes in
this sector. Over a period of time
government has come up with a lot
of remedial measures. He added
that transparency is required to cre-
ate a friendly business environment.
In terms of technological
intervention, the investors need
sufficient motivation to bring in the
latest technology. Concerns were
flagged about multiple agency
clearances such as Ministry of
Environment, Ministry of Petroleum
and Natural Gas, Ministry of
Forestry, Ministry of Defense which
conduct naval exercises and space
programs on areas located near
the reserves. The clearances are
numerous and time consuming.
In case of international projects
it gives negative publicity to the
country where the reserves are
located. National data repository
system seems to be a solution to
some of these issues. Willingness
of the government, regulator and
companies is vital to address the
above mentioned issues.
Supply Chain
Mr. Anil Kumar Sachan, Head
– Material Management, ONGC,
spoke about sustainable and trans-
parent supply chain. He gave a brief
outline about the characteristics of
high risk high return of oil and gas
industry. He illustrated the supply
chain issues through the exam-
ple of a project that involved laying
pipelines from Tapi Basin to Delhi,
wherein a minor fault in the pipes
could disrupt the entire supply of oil.
He said presently the supply chain
management is working well in the
western part of the country but is
weak in the North East.
Mr. Sachan spoke about several
ethical issues related to supply
chain management like favoritism,
bribery and lack of business integ-
rity, labor related issues such as
long working hours, safety, ade-
quate medical and emergency facil-
ities and environmental issues like
pollution prevention, treatment and
disposal of waste water.
ONGC is taking initiative of using
electronic procurement as a
method to procure goods and ser-
vices of above INR 1 crore. ONGC is
also the first Public Sector Under-
taking (PSU) to introduce Integrity
Pact in procurement processes to
ensure fair selection of contractors.
Mr. Sachan suggested that there
should be:
• A reporting and feedback mech-
anisms for vendors.
• Assurance of timely payment to
vendors.
• Contracts should be mandated
to adopt HSE (Health Safety Envi-
ronment) and Labor policies.
This should be made as tender
requirement in prequalification
process.
• Public reporting on performance
using systematic reporting
framework including informa-
tion about tenders finalized and
contractor details.
Mr. A. K. Dwivedi, Director Exploration,
ONGC
Mr. Anil Kumar Sachan, Head – Material
Management, ONGC
ONGC IS TAKING INI-
TIATIVE OF USING
ELECTRONIC PRO-
CUREMENT AS A
MEDIUM TO PRO-
CURE GOODS AND
SERVICES OF ABOVE
INR 1 CRORE. ONGC
IS THE FIRST PUBLIC
SECTOR UNDERTAK-
ING TO INTRODUCE
INTEGRITY PACT IN
PROCUREMENT PRO-
CESSES TO ENSURE
FAIR SELECTION OF
CONTRACTORS”
- MR. ANIL KUMAR SACHAN,
HEAD – MATERIAL MANAGEMENT,
ONGC

Mr. Nitin Banerjee, Legal Counsel,
BG Group, established the relation
between ethical conduct and busi-
ness by mentioning that an ethical
company attracts investors and good
human resource. Ethical conduct
is critical to developing a sustaina-
ble and transparent supply chain.
He also spoke about the UK Bribery
Act 2010 which consists of six prin-
ciples; risk assessment, top level
commitment, due diligence, clear
practicable & accessible proce-
dures, effective implementation and
monitoring & review. He explained
these principles through the exam-
ple of LNG project in UK which was
aborted due to allegations of bribery.
Mr. Banerjee spoke about the work
of BG group which conducts due
diligence for companies. He raised
three questions:
• Does transparency contradict
sustainability?
• Is contractor relationship a must
in developing a sustainable sup-
ply chain?
• What are the dilemmas of devel-
oping a transparent and sustain-
able supply chain?
In Conclusion
Mr. Dwivedi said systems take time
to evolve. For example earlier, explo-
ration sites were given on nomina-
tion bases. A clear policy on explo-
ration and allocation was desired
which came into being in forms of
New Exploration Licensing Policy
(NELP) in 1999. After the liberaliza-
tion, government wanted transpar-
ency in capital, usage of technology
and fair competition in all the major
activities of Oil and Gas sector, this
was echoed in the NELP regime.
Mr. Banerjee explained that oper-
ational cycles in oil and gas sector
are considered to be long because
of geological, technical, regulatory
clearances and uncertainties, but
most likely supply chain procure-
ment cycle is not more than for two
years. For a sustainable supply chain
accessibility to tender process.
Most of the companies have intro-
duced e-tendering to make the bid-
ding transparent. Currently, all the
tenders worth INR 1 crore and above
are electronically tendered. There
have been discussions to reduce
this threshold value to INR 10 lakhs.
2) Introduction of Integrity Pact to
curb corruption. Private sector is
yet to adopt the IP.
3) Whistle blower protection.
Companies should provide support
to whistle blowers.
4) Extend transparency and
Mr. Nitin Banerjee, Legal Counsel,
BG Group
OPERATIONAL CYCLES IN OIL AND GAS SECTOR
ARE CONSIDERED TO BE LONG BECAUSE
OF GEOLOGICAL, TECHNICAL, REGULATORY
CLEARANCES AND UNCERTAINTIES BUT MOST
LIKELY SUPPLY CHAIN PROCUREMENT CYCLE
IS NOT MORE THAN FOR TWO YEAR”
- MR. NITIN BANERJEE, LEGAL COUNSEL, BG GROUP
it is important to train the employ-
ees on a regular basis. It is impor-
tant to trust the ability of employees,
empowering them will help in main-
taining high ethical standards.
Mr. Sachan opined that instead
of developing long term relation-
ship with one vendor it is better to
develop long term relationship with
multiple vendors to ensure compe-
tition and good services. He added
that developing sustainable supply
chain is a ‘work-in-progress’.
Mr. Sachan outlined some of the
recommendations to strengthening
ethics and corporate governance in
the supply chain system.
1) Increase transparency and
anti-corruption practices to con-
tractors and sub-contractors.
Successful bidders sign the Integrity
Pact with the contractors. As per the
provisions of IP, contractors have
the responsibility to sign IP with the
sub-contractors.
5) Ensure timely payments to
business partners. Companies
should make timely payment to its
vendors and in case of delays, the
delay should be justifiable.
6) Vendor rating. It is important to
bring quality vendors right from the
beginning of the tender process.
Vendor rating could give a clear
picture on the performance of the
vendors. The parameters for such
rating should be deliberated.

7) Incentive- penalty clause. There
should be incentive and penalty
clause in the contract.
8) Bring clarity on document
requirements for the contracts.
This could help in fixing accounta-
bility in the supply chain.
9) Build Trust with external stake-
holders.
10) Establish excellent communi-
cation throughout supply chain.
11) Develop internal reporting & feed-
back mechanisms for contractors.
12) Adopt best practices on HSE,
Labor. HSE and Labor policies
should be included in prequalifica-
tion process. Certain kinds of con-
tracts require special care to imple-
ment health and safety norms.
13) Work with contractors and
ensure compliance with environ-
ment protection laws. Environ-
mental protection is everyone’s
business. It is not limited to major
companies.
INSTEAD OF DEVELOPING LONG TERM
RELATIONSHIP WITH ONE VENDOR IT
IS BETTER TO DEVELOP LONG TERM
RELATIONSHIP WITH MULTIPLE VENDORS TO
ENSURE COMPETITION AND GOOD SERVICES.
HE ADDED THAT DEVELOPING SUSTAINABLE
SUPPLY CHAIN IS A ‘WORK-IN-PROGRESS’”
- MR. ANIL KUMAR SACHAN, HEAD – MATERIAL MANAGEMENT, ONGC
14) Complete environmental, social
and health impact assessments, if
possible before signing contracts.
15) Direct engagement with con-
tractors and sub-contractors to
implement mechanisms to respond
to community grievances.
16) Contractors and sub-con-
tractors to follow S.O.P on vari-
ous operational activities as per
industry standards. If there is
some industry code of conduct to
be adhered to, personal protection
equipment to be used and contrac-
tors and sub-contractors should
follow safety instruction norms.
17) Public reporting on perfor-
mance using systematic reporting
framework, including information
about tenders finalized and contrac-
tor details. Public reporting to follow
strict regulations.

BREAKOUT SESSION - II
CHALLENGES, GOOD PRACTICES,
RECOMMENDATIONS AROUND REGULATOR
FRAMEWORKS AND DISCLOSURES/REPORTING
Mr. S. Rath, Board Member, Oil
India, spoke about the procedures
of the public sector, a tendering
process involving numerous doc-
uments, the relevance and mean-
ing of which might not be correctly
understood by the operational man-
agers. Due to procedural hassles
many foreign companies hesitate to
invest in India. He said that there has
to be partnership between contrac-
tor, government and regulator. The
policy guidelines should not change
with changing government and in
case there is change, it should indi-
cate progressiveness.
To a question asked by a participant
as to what changes are required in
the contractual system in upstream
sector to make it more business
friendly and what should be done to
get clearances, Mr. Rath responded
that contracts should be aligned with
best practices of company. Contracts
should define payment norms clearly
and have its own payment policy.
Ms. Aditi Haldar, Director of GRI
Focal Point India, spoke about the
core purpose of business and raised
questions about sustainable devel-
opment versus industrial develop-
ment. Sustainable development is
about manufacturing of goods and
services which creates long term
value for the society. Sustainable
reporting refers to measure, man-
age, and communicate the respon-
sibility of companies to larger audi-
ences. Reporting is essential for
fixing accountability of the usage of
natural capital, human and financial
capital and governance.
Mr. S. Rath, Board Member, Oil India
(Left-Right) Ms. Aditi Haldar, Mr. Anand Kumar and Mr. S. Rath

Sustainability report is gaining
importance all over the world. Finan-
cial institutions are asking for sus-
tainability report for businesses as a
prerequisite for doing certain trans-
actions. Sustainability report involves
principle of materiality. This principle
helps to understand the relevance of
environmental and social issues to
the businesses. She spoke about the
scope of sustainability in transparent
functioning of supply chain manage-
ment. However there are certain
important sustainability issues in oil
and gas sector. She further said that
sustainability reports should be used
to evaluate present actions. This
could facilitate in planning activities
and operations of the businesses for
better growth in the future. than L1 and conflict resolution. India
stands 179 in its position of doing
business indicating that India is seen
as not an investor friendly country.
He responded to Ms. Haldar’s ques-
tion about “What is the core purpose
of business” by quoting Gandhi, who
said that “Business was an opportu-
nity to serve people better” and that
the first and foremost objective of
any business is to sell. Unless you
sell you can’t survive and in order to
sustain selling one has to continu-
ously innovate to sustain and over-
come the hurdles of competitors.
In the past most of the construction
work was undertaken by the govern-
ment but with passage of time gov-
ernment introduced the Public Pri-
vate Partnership (PPP) model, which
harnesses the strength of both the
public and private companies. Mr.
Kumar elaborated on the difficulties
of doing business in India, empha-
sizing on clarity of purpose, rules,
specifications, conditions, bounda-
ries and accountability, which hold
key to transparency, ethical govern-
ance and sustainable business. Mr.
Kumar added that technology is a
great enabler to bring about trans-
parency, and that is the reason Gov-
ernment has put great emphasis on
digitizing the whole country.
In conclusion, he said that corpo-
rate social responsibility is reflec-
Ms. Aditi Haldar, Director of GRI Focal
Point India
Mr. Anand Kumar, Director, Petrotech
Mr. Anand Kumar, Director, Petro-
tech, in his concluding remarks said
that the primary objective of the con-
sultation was to discuss the UNGC
10th principle against corruption
and its importance in the Oil and Gas
sector. Oil and gas is a vast sector,
the intrinsic nature of this sector of
being high on investment and long
gestation makes it risky. Govern-
ment has introduced certain for-
ward looking policies but still there
are certain constraints in the sector
such as non-availability of national
repository, lack of clarity in Produc-
tion Sharing Contracts for explora-
tion and production oil, ambiguity in
taking decision based on Q1 rather
Ms. Shabnam Siddiqui, Project Director,
GCNI
tion of company’s values, empathy
and sense of responsibility towards
the community and environment in
which it operates. It is a means for
integrating corporate activities with
the society, which involves people,
inculcate a sense of collective own-
ership, sharing the company’s vision,
participating in company’s mission
and eliminating corruption, which
certainly would add great value to
the company as well as the society.
Conclusion
Ms. Shabnam Siddiqui, Project
Director, GCNI, concluded the pro-
ceedings of the day by saying that
consultation has left a lot of ques-
tions unanswered, questions that
need to be deliberated in subsequent
forums. Collectively the stakehold-
ers need to come up with focused
recommendations and chart out an
action plan to bring about further
transparency in Oil and Gas sector
and strengthen ethical corporate
governance in their sector.
Ms. Siddiqui acknowledged the con-
tribution of a team of students (MBA
– Oil and Gas Management) from
University of Petroleum and Energy
Studies (UPES) comprising of Minak-
shi Zalke, G. Arun and R. Deepthi
Krishnan for minute taking at the
Consultation.

ABOUT GLOBAL COMPACT NETWORK INDIA
The UN Global Compact is a strategic policy initiative for businesses that are committed
to aligning their operations and strategies with ten universally accepted principles in
the areas of human rights, labour, environment and anti-corruption. With over 12,000
corporate participants and other stakeholders from over 145 countries, it is the largest
voluntary corporate responsibility initiative in the world.
The Global Compact Network India ranks among the top 3, out of the 102 local networks in
the world, and has emerged as the largest corporate citizenship and social responsibility
organization in the country with a pan Indian membership. With a membership of 183
corporate participants and organizations, the local India network, in the last 12 years of
its functioning, has created a strong niche for itself. GCNI members represent pertinent
sectors of the country such as private and public sector enterprises, civil society, and
academia; collectively deliberating and developing a common development agenda on
sustainable development.
ABOUT PETROTECH
Petrotech is a registered body set up by the distinguished members from public, private,
multinational and government in the Petroleum Sector to showcase the achievements
and developments of the Oil & Gas Industry in India; develop co-operation in science and
technology of hydrocarbon industry and share national and international experience and
expertise in Oil & Gas business.
The Petrotech series of Conferences and Exhibitions which started in 1995 began
a movement where all players of the oil and gas industry belonging to upstream,
midstream and downstream sectors both from India and abroad met on a common
platform to discuss the issues, concerns, strategies and technological advances in this
field of hydrocarbons. These Conferences are held biannually and have gained reputation
internationally and attract participation from India and overseas in large numbers.
ABOUT STRENGTHENING ETHICAL AND TRANSPARENT
CORPORATE GOVERNANCE PROJECT
Global Compact Network India's 'Strengthen Ethical and Transparent Corporate
Governance Practices and Further Responsible Development Project' is supported
by the UK Prosperity Fund India Programme. The Project is part of a wider goal of
mainstreaming Anticorruption Collective Action in the development agenda of India.
Indian businesses are already witnessing a rise in ethical and transparent governance
practices. This Project further strengthens the trend by bringing together senior
stakeholders, in business and bureaucracy, to take forward the collective agenda of
transparency and responsible development forward. The Project facilitates constructive
dialogue and bridges the gap in knowledge of anticorruption instruments and sector-
specific challenges to transparent and sustainable development agenda in India.

STRENGTHENING ETHICAL CORPORATE GOVERNANCE IN OIL, GAS AND PETROCHEMICAL SECTOR IN INDIA & OFF-SHORE

STRENGTHENING ETHICAL CORPORATE GOVERNANCE IN OIL, GAS AND PETROCHEMICAL SECTOR IN INDIA & OFF-SHORE

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to STRENGTHENING ETHICAL CORPORATE GOVERNANCE IN OIL, GAS AND PETROCHEMICAL SECTOR IN INDIA & OFF-SHORE

Similar to STRENGTHENING ETHICAL CORPORATE GOVERNANCE IN OIL, GAS AND PETROCHEMICAL SECTOR IN INDIA & OFF-SHORE (20)

Recently uploaded

Recently uploaded (20)

STRENGTHENING ETHICAL CORPORATE GOVERNANCE IN OIL, GAS AND PETROCHEMICAL SECTOR IN INDIA & OFF-SHORE