The DGH ad response

Against the backdrop of a CBI inquiry into the alleged nexus between Reliance Industries Ltd(RIL) and director general of hydrocarbons (DGH) VK Sibal, the oil regulator launched an advertisement campaign saying the exchequer would get $16.57 billion compared to $9.5 billion for the company .
Capital expenditure at RIL's KG-D6 field had gone up from $2.47 billion to $8.8 billion due to a three-fold rise in plant capacity, doubling of output, 16 additional wells and a host of other facilities, the full-page advertisements said.
KG-D6 cost ranks among the lowest in the world, the DGH said, citing a Goldman Sachs report of 32 similar projects. The DGH noted that apprehensions of inflating cost are therefore misplaced unless the operator siphons off money through transactions with affiliates. The DGH justified the advertisement saying it was for the benefit of investors who may be interested in bidding for the 70 oil and gas blocks offered under Nelp-VIII and 10 blocks under fourth round of coal bed methane (CBM), the last date for which is October 12.
Since CAG did not have the mandate to audit the books of a private company, the auditor scrutinised the records on KG-D6 available with the petroleum ministry and DGH. "This process was carried out by the CAG audit team during the period of about t a year and the CAG audit team returned back about six months before.CAG has now been given access by RIL" to its books, DGH added.
At $4.20 per million british thermal unit (mmbtu) price, the government will earn Rs 77,879 crore in profit share, taxes and royalty while net revenues to the RIL Niko combine would be Rs 49,961 crore.
The DGH refrained from naming Anil Ambani Group firm Reliance Natural Resources Ltd (RNRL) but mentioned that the production sharing contract (PSC) provides only actual expenditure to be accounted for and subject to multiple levels of audit.
On Wednesday, RNRL filed a petition in the Supreme Court accusing DGH head V K Sibal of colluding with RIL in approving the "gold-plated" costs.
At the government-approved gas price of $4.2 per mmbtu, the total revenues over the life of the field would be $38.30 billion (Rs 187,670 crore).After deducting capital and operating expenses, the total profit over the field's life would be $25.30 billion, the DGH added The rise in KG-D6 cost was due to increase in place gas reserves from 7.6 trillion cubic feet (tcf) to 12.59 tc which included reserves in deeper water and more complex subsurface conditions. "The recoverable reserves were initially estimated at 5.3 tcf with a peak production rate of 4 million standard cubic meters per day (mmscmd). The recoverable reserves have now been revised at 10.0 tcf with a peak production rate of 8 mscmd," DGH added.

1 comment:

Auditing services india said...

I think there should be no biasing by the government in taking decisions about this gas supply feud.