subject: Dgh Approves Rils Capex In Kg-d6 Gas Fields [print this page] Mukesh Ambani owned conglomerate Reliance Industries Limited has got a clean chit from the Directorate General of Hydrocarbon. Up to 2007-08, RIL spent $2.5 billion in developing the KG-D6 gas fields, which stands approved by the DGH, as CAGs audit failed to quantify any loss to the exchequer.
Though RILs capital expenditure up to 2008 has been approved, CAG will now be inspecting accounts of RIL-operated D6 block since 2008-09, informs a technical advisor from the oil ministry. Officials from the oil ministry and DGH added that if there is any illegitimate expenditure, it will be recovered from the company. An official from DGH said, The government can recover any amount indicated by CAG in its subsequent audits from RIL, as field-life of the D6 block is more than 20 years. Audit review is the prerogative of CAG which cannot be duplicated by the oil ministry.
Out of the approved capex estimate of $8.8 billion, RIL has spent $5.59 billion in the development of D6 gas fields up to March 2011. An official who wished to be unnamed said that RIL has recovered the entire amount from proceeds of the fields. Rise in capex estimates for D1 and D3 gas fields from $2.4 billion in 2004 to $8.8 billion in 2006 for doubling the estimated output from 40 mmscmd to 80 mmscmd was under scrutiny too. The then oil minister Murli Deora had asked CAG to scrutinize accounts of private oil and gas operators, to confirm facts.
DGH requested CAG to give specific recommendations on cost to be disallowed, when CAG report apprehended cost escalation by RIL in the D6 block. However, CAG has given no recommendations in this case. The final CAG report on performance audit of oil and gas blocks released in September has no mentions about cost escalation in the D6 block.
Cost recovery is the key plank of the New Exploration Licensing Policy (NELP), which invites bidders for oil and gas blocks. According to NELP, the risk is entirely borne by energy firms, and companies do not get any compensation for losses. The natural gas output from the KG-D6 fields has fallen below the target and the Oil Ministry has sanctioned taking action against Reliance Industries Limited. Oil Minister S Jaipal Reddy said that scrupulous action may be taken against RIL for the falling outputs. Officials from CAG, RIL, DGH and the Oil Ministry chose to remain non-committal, when asked to confirm the news.
