Mukesh Ambani-controlled Reliance Industries Ltd and other oil exploring companies will get an opportunity to explain their position on the observations of the Comptroller and Auditor General (CAG)’s draft report during an exit conference in July.
The exit conference is a crucial interaction between CAG and the Ministry of Petroleum and Natural Gas before the regulator finalises its report on oil exploration blocks and production sharing contracts.
Responding to the reports that suggested that Reliance was denied an opportunity to comment on the draft report on production sharing contracts for oil and gas blocks, CAG said all parties mentioned in the report will get a chance to respond.
A CAG press release said here today that the petroleum ministry “may call the representatives of the operators at the time of discussion of the operator- specific points, during the exit conference”.
“We deal with the ministry and the ministry deals with the private sector. Based on the information given by the ministry, we have prepared our draft report and sought ministry response. They will get the details from the developer,” a CAG official explained.
The official also said the apex auditor will not be surprised to see a very different final report as the ministry and private developers may have satisfactory explanations to several audit observations made by CAG. “This is the first opportunity given to them to explain their position. They may have satisfactory explanations,” the official added.
The CAG statement clarified that at no stage had the apex auditor refused any operator an opportunity to respond to its draft observations. CAG said in this particular case, interactive meetings were held with two operators, including Reliance, prior to the finalisation of the draft performance audit report.
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CAG had also sought the date for an exit conference for discussing the audit findings in the draft report and then subsequently a reminder was sent on June 22 to the Ministry of Petroleum and Natural Gas, the statement said.
On sharing the draft performance audit report with operators, CAG said the established audit methodology allows the draft report to be forwarded to the ministry and then, it is for the ministry to take a view on what operator- specific points it needs to share, at the stage, with operators.
The draft report has blamed the petroleum ministry and its technical arm DGH for irregularly allowing RIL, the operator of D6 block, to enter successive phases of exploration without the stipulated relinquishment of the area. Later on, the operator was allowed to declare the entire contract area as discovery area and relinquishment was avoided. “The undue benefit granted to the contractor is huge, but cannot be quantified. CAG has suggested that immediate steps should be taken for relinquishment of excess area in line with the production sharing contract (PSC).”
CAG has also questioned the reasonableness of costs incurred by RIL in respect of various high-value procurement activities during 2006-07 and 2007-08.
CAG pulled up the ministry for granting 1,708 sq km additional area beyond the contract area in respect of the Rajasthan block operated by Cairn India. It has also pointed out to non-compliance of PSC with regard to the appraisal programme and field development plans.
On PMT fields operated jointly by RIL, BG and ONGC, CAG said the operators have not completed key work commitments, while the cost recovery limit has been exceeded. CAG has also noticed several instances of excess expenditure and deficiencies in procurement in the PMT fields.