CAG in its draft report had rapped oil ministry and its technical arm DGH for allegedly favouring Reliance by allowing it to double KG-D6 gas field’s cost but it stopped short of saying if the Mukesh Ambani firm had overbilled the government and thereby caused loss to the state exchequer.The CAG in its draft audit report on KG-D6 block said the ministry and DGH also bent the rules to grant “huge benefits” to Reliance when it was allowed to retain the entire block, but said gains cannot be quantified
The increase in (Phase-1) cost from ($2.39 billion proposed in the) Initial Development Plan (of May 2004) to ($5.196 billion) in the addendum to the Initial Development Plan is likely to have a significant impact on the government of India’s financial take.The CAG conducted the audit of the Reliance accounts after allegations of ‘gold-plating´, or artificially inflating the development costs of Dhirubhai-1 and 3 gas fields, two of the 18 discoveries in KG-D6 block, were levied by the Anil Ambani Group.
CAG recommended that the “role of DGH and government of India representative on the Management Committee may be closely scrutinised to see why the operator was allowed to violate the provisions of Production Sharing Contract (PSC) and not adhere strictly to the terms of the approved initial development plan.On KG-D6, CAG said the submission of an addendum to the initial Development Plan (IDP) instead of a revised comprehensive development plan, as well as lack of adequate details with regard to the Phase-II development cost of $3.3 billion, made it virtually certain that the operator will submit more addendums.It also found a “similar irregular determination of the entire contract area” as ‘discovery area’ in the case of another block operated by Reliance, dubbed KG-OSN-2001/2.
The petoleum ministry said it will intiate action against RIL for not only digging Dhirubhai-1(D-1),D-3 gas fields but also for continuing fall in production that has gone down to 34 million metric cubic meters a day(mmcmd).The target out put is 61.88 mmcmd.RIL has also achieved the out put around 80 mmcmd .RIL said it would limit the expenditure it was allowed to recoup.Prime minister has said that the fall in production was a cause of concern and punitive action was being considerd as one of the actions.The PSC doesn't link cost recovery to out put, but the petroleum ministry wants to restricts this in proportion to gas production vis-a-vis the target. If there are changes in PSC they will be introduced from future NELP rounds.They will have a prospective effect.
In a status report filed by the company with the petroleum and natural gas ministry, it has stated that the Dhirubhai 1 and 3 (D1 ans D3 ) the first two of the 18 gas discoveries in KG basin that have been put on production and the MA oil field in the same area.The drop on production is due to the dip in pressure in the wells and the increased water ingress led to lower pre- well gas out. Out of 18 wells drilled and put on production o D1 and D3, four wells A2,B1,B2, and B13 had to be closed due to high water cut/sanding issues. As per the status report, out of 22 wells planned in phase-1 of D1 and D3 field development, 18 wells have been drilled and completed so far.
