Oil and gas field regulator DGH today rejected industrialist Anil Ambani's charges that it had approved Reliance Industries Rs 45,000-crore "exorbitant capital expenditure" plan for gas fields, saying the actual expenditure is subject to three audits, including one by CAG.
The Production Sharing Contract (PSC) provides for auditing of the actual expenditure by three sets of auditors - the management committee appointed auditors, government appointed auditors and by the Comptroller and Auditor General of India (CAG).
"The CAG team has carried out the audit work," said V K Sibal, Director General, Directorate General of Hydrocarbons (DGH) in a three-page post on the DGH's official website.
RIL is investing $8.836 billion (about Rs 42,500 crore) in developing the Dhirubhai-1 and 3 gas finds in block KG-D6 - first two of the 18 gas finds in the block.
"The idea of gold plating betrays a lack of knowledge of business economics. Inflating the expenditure does not benefit any stakeholder- neither the contractor nor the government. No company would like to increase its investment unproductively. Every additional dollar of wasteful investment dents the profit of the contractor," Sibal said without naming Anil.
Anil had yesterday demanded "an independent and objective re-examination by public accountability bodies like the CAG and the CVC of the apparently exorbitant capital expenditure of Rs 45,000 crore... In order that such capex recovery is brought down to realistic levels."
The development cost or capital expenditure approved by a management committee comprising of representatives of petroleum ministry, DGH and companies concerned are broad, indicative numbers that are used to work out the economics of a project over its lifetime, DGH said.
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There was no hasty approval of RIL's revised expenditure and due diligence of revised expenditure by different agencies had been carried out.
Sibal, however, stated that DGH had commissioned two independent studies to validate the capex proposed by RIL and both have concurred to the estimates made by RIL.
"This project happens to be the first deepwater development project in India. It is pertinent to mention here that the Dhirubhai gas discovery is the largest gas discovery in the world for the year 2002. In any other country, it would have been hailed and cherished.
However, we are content with squabbling over this outstanding success," Sibal said.
In the opinion of the independent and reputed technical experts, RIL's "development plan is highly cost effective and fast track," he said.
"A CAG audit has recently been completed," he said.
The Goldman Sachs Report on Global Finding and Development Costs 2008 clearly states that out of the 32 deep water projects developed in the world, D6 ranks among the lowest in terms of costs and amongst the fastest in terms of time from discovery to production.