The public spat between the government and the Anil Dhirubhai Ambani (ADA) group continued today, with downstream petroleum regulator Directorate General of Hydrocarbons (DGH) defending the $8.8-billion capex plan of Reliance Industries Ltd (RIL) for the KG-D6 field and reiterating the importance of the production sharing contract (PSC).
In a statement posted on DGH’s website, Director General Of Hydrocarbons V K Sibal said: “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.”
Reacting to DGH’s statement to a television channel saying that the current production from the D6 field was 31 million metric standard cubic metres a day (mmscmd), owing to the absence of a further market for gas, the ADA group stated that it (DGH) vindicated their stance that RIL was curbing production to artificially justify its exorbitant prices. The Anil Ambani camp added that there was no further demand at such high prices.
“We are surprised by the DGH’s comments that inflating the capex on KG-D6 does not benefit RIL. According to the PSC, RIL is entitled to first recover its entire capital expenditure before the government gets any meaningful share and, hence, RIL has substantial motivation to claim higher capex. Simply put, the more RIL claims to have spent on capital expenditure, the less the government gets as its share from the revenues, and more delayed is the timing when the government gets its revenues,” a statement from the ADA group said.
It added that DGH should publicly disclose the full reports of CAG, Indian experts, international engineering consultants and independent auditors, referred to in the statement, including their identity & process of their selection, the terms of reference, etc.
