Reliance Industries Ltd (RIL), which got some stick from the Comptroller and Auditor-General, has refuted all findings including that of gold plating in the D6 gas fields.
Other oil and gas operators — including Cairn India and BG that were criticised by the CAG — and officials of the Petroleum Ministry and the Directorate-General of Hydrocarbons (DGH) gave detailed observations separately to the CAG on Tuesday.
The DGH is understood to have clarified that production sharing contracts allowed companies to revise the cost and field development plans.
Sources privy to the developments told
The CAG was asked to do a performance audit of some important production sharing contracts – such as RIL D6 block, Cairn India's Rajasthan oil fields, and BG-RIL-ONGC-operated Panna-Mukta-Tapti fields — by the Ministry for Petroleum and Natural Gas. The CAG audit was for 2006-07 and 2007-08.
The RIL team, led by Mr P.M.S. Prasad, Executive Director, countered all the observations made by the Government auditor in its interim report.
In case of RIL's D6 block, the CAG had observed that the contractor had inflated the development cost.
While clarifying on the issue of loss to the Government due to alleged cost inflation by the operator, the DGH is understood to have said that cost for the purpose of computation of Government take is determined on actual expenditure incurred and duly validated by audit, and is not based on development plan estimates. Any expenditure qualified by audit will be disallowed as contract cost, the DGH said, adding that in view of this any adverse impact on Government take cannot be automatically assumed.
The amount of actual expenditure incurred on phase-I of the development plan is $5.6 billion up to March 2011. The second phase development plan involving $3.6 billion is scheduled to begin, and the operator has proposed drilling of more wells in the work programme or budget of 2011-12.
Cairn was represented by Mr Indrajit Banerjee, Executive Director & Chief Financial Officer.
The CAG is holding an exit conference with the operators and Petroleum Ministry officials before finalising its report.
The CAG has criticised the Ministry and the DGH for allowing Cairn to explore beyond the contracted areas. The DGH is understood to have said that the additional area was granted according to production sharing contracts.
A joint venture of Reliance, BG and ONGC that operates the Panna-Mukta and Tapti fields has also been flayed for inflating the development cost.