Reliance Industries violated gas contract: AuditorSeptember 8th, 2011 - 5:09 pm ICT by IANS
New Delhi, Sep 8 (IANS) Mukesh Ambani-led Reliance Industries violated the agreement to share gas produced in the Krishna-Godavari basin and failed to part with the government’s due share of the hydrocarbon, the official auditor said Thursday.
In a report tabled in parliament, the Comptroller and Auditor General of India (CAG) did not make any comment, though, on the manner in which the company had sharply raised its capital expenditure claimed on the project from $2.4 billion to $8.8 billion.
As per the production-sharing contract, Reliance Industries should have given to the government a share of 25 percent of the total area outside that allocated to it. However, the company was allowed to treat the entire area as its discovered area, the report said.
There was also an about-turn in the government’s and the watchdog’s own interpretation, said the auditor, since it earlier had held that the 25 percent share must be given to the government.
“Subsequently, in February 2009, the Government of India also conveyed its approval to treat the entire contract area of 7,645 sq km as discovery area, thus enabling the operator to completely avoid relinquishment of area,” the report observed.
“We recommend the Ministry of Petroleum and Natural Gas should review the determination of entire contract area as discovery area, strictly in terms of the production sharing contract provisions,” the report said.
Reliance Industries said it would not be in a position to give its complete comment on the matter as it was yet to see the final report of the auditor, but added that it will continue to cooperate with the audit agency and the government.
“We maintain that in KG D6, Reliance Industries has set global benchmark for effective, efficient project completion and capital cost competitiveness under the most trying circumstances and we are proud of our achievements,” the company said.
“We reiterate that as a contractor, we remain committed to complying with the production-sharing provisions and procedures, including the adopting good international petroleum industry practices in our operations.”
The issue had raised a lot of heat within and outside parliament two years ago, resulting in a probe by the Central Bureau of Investigation (CBI) that is still ongoing into the conduct of then director general of hydrocarbons V.K. Sibal.
The oil ministry had written to the official auditor in November 2007 requesting special audits on certain oil and gas blocks awarded under both the new and the old norms. The report tabled Thursday covers two fiscal years since April 2006.
According to the audit report, the oil regulator should have stopped Reliance Industries — India’s largest company in terms of market capitalisation — from proceeding with the sunsequent phases of producing gas in the light of the earlier violation of contract.
The company, according to the oil watchdog, has been producing 48 million standard cubic metres of gas per day from the fields called the D6 block, off the Andhra Pradesh coast, where one of the world’s largest discoveries of gas were made in 2002.
This production volume, however, is not only lower than the company’s stated estimated peak capacity of 80 million units but also 60 million units being produced last year.
The report also said the oil ministry and the directorate were ill-equipped to oversee the production-sharing contracts with private players and said functions that are of a regulatory nature must be addressed by an autonomous body.
The report also examined a Rajasthan block awarded to Shell and transferred to Cairn and the Panna-Mukta and South Tapti fields awarded to Enron and Reliance Industries, where the former later transferred its 30-percent share to British Gas.
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Tags: ambani, cag, capital expenditure, competitiveness, comptroller and auditor general, comptroller and auditor general of india, contract area, contract provisions, d6, discovery area, due share, gas contract, global benchmark, godavari, government of india, hydrocarbon, krishna godavari basin, project completion, reliance industries, watchdog