A government-controlled oversight panel has so far approved less than half of the $9.47 billion expenditure that Reliance Industries (RIL) has claimed for producing oil and gas from its KG-D6 block, Oil Minister S Jaipal Reddy said today.
The contract for eastern offshore KG-DWN-98/3 or KG-D6 block provides for all actual expenditure incurred to be first recovered from sale of oil/gas before profits are split between the contractor and the government.
Reddy said RIL has claimed $9.47 billion in cost of developing Dhirubhai-1 and 3 (D1&D3) gas fields, MA oilfield and exploration in the 7,645 sq km block in Bay of Bengal.
Of this, it has recovered $5.26 billion even though the Management Committee, which overseas operations of the block, has approved only $3.99 billion cost recovery up to 2007-08 fiscal.
"While [the] contractor [RIL] has claimed an expenditure of $9.47 billion and cost recovered $5.26 billion up to 2010-11, the MC has approved only $3.99 billion up to financial year 2007-08," he said in a written reply to a question in Rajya Sabha here.
Of the $9.47 billion, RIL and its partners had incurred $5.7 billion in developing D1&D3 gas fields and another $1.73 billion in bringing MA oilfield into production.
"The audited accounts are placed before MC for adopting the same as provided under the Production Sharing Contract (PSC). MC has approved the said audited accounts upto the year 2007-08," he added without details of accounts of subsequent years.
The auditors appointed by the government had audited accounts of KG-D6 block up to 2006-07. The Comptroller and Auditor General (CAG) carried out a special audit of the block for 2006-07 and 2007-08 and has agreed to conduct regular audit for the block for 2008-09.
Reddy said while CAG in report had observed that large procurement contracts were given on single bid basis, the top auditor "has not quantified any loss of revenue to the Government."
"The report of the CAG is under consideration of Public Accounts Committee [PAC]," he added.
Natural gas production at KG-D6 has fallen to about 35-36 million standard cubic metres per day from 61.5 mmscmd achieved in March 2010.
While RIL says output has fallen because of fall in reservior pressure and ingress of water and sand in wells, the oil ministry and its technical arm Directorate General of Hydrocarbons (DGH) believes it is due to the company drilling less number of wells.
