Facing allegations of approving Reliance Industries' (RIL) inflated gas field costs, that could hurt government revenue, oil regulator Directorate General of Hydrocarbons (DGH) today launched an advertisement campaign saying the exchequer would get $16.57 billion compared to $9.5 billion for the company.
DGH, through full-page advertisements, said that the capital expenditure at RIL's KG-D6 field had gone up from $2.47 billion to $8.8 billion due to a three-fold rise in plant capacity, doubling of output, 16 additional wells and a host of other facilities.
The advertisement was reminiscent of Anil Ambani group firm Reliance Natural Resources' (RNRL) ad campaign in August, wherein the company accused the oil ministry of helping RIL earn super-normal profits. RIL had then gone to court, alleging that the propaganda was intended at prejudging the issues pending before courts.
KG-D6 cost ranks among the lowest in the world, DGH said citing Goldman Sachs report of 32 similar projects.
It said at $4.20 per mmBtu price, the government will earn in profit share, taxes and royalty of Rs 77,879 crore while the net revenues to RIL-Niko combine would be Rs 49,961 crore.
Without naming Anil Ambani Group firm RNRL, DGH said the Production Sharing Contract (PSC) provides only actual expenditure to be accounted and the same was subject to multiple levels of audit.
RNRL had on Tuesday filed a petition in Supreme Court accusing DGH head V K Sibal of colluding with RIL in approving the "gold-plated" costs.
DGH said it brought out the advertisement keeping in mind the concerns of investors who may be interested in bidding for the oil and gas blocks offered under India's largest ever auction, under New Exploration Licensing Policy. Bids for the 70 blocks close on October 12.
The point-by-point rebuttal to allegations levelled in the RNRL media campaign said that since government auditor CAG did not have the mandate to audit the books of a private company, CAG scrutinised records on KG-D6 available with the Petroleum Ministry and DGH. "This process was carried out by CAG audit team during the period of about a year and the CAG audit team returned back about six months before."
"CAG has now been given access by RIL" to its books, DGH added.
After RNRL moved Supreme Court on Tuesday, Sibal wrote to ministries of home and oil alleging "witch-hunt" by Anil's group to ruin his career and also feared a threat to his life.
"ADAG is a corporate giant with unlimited resources. It is clear from the recent actions of this group that they are bent upon damaging my professional and personal life... In view of this I will not be surprised if ADAG resorts to violent means to achieve their objective. Therefore, I perceive a threat to my family members and myself."
The rise in KG-D6 cost was due to increase in in-place gas reserves from 7.6 trillion cubic feet (Tcf) to 12.59 Tcf, which included reserves in deeper water depth and in more complex subsurface conditions, the DGH added.
"The recoverable reserves were initially estimated at 5.32 Tcf with a peak production rate of 40 million standard cubic meters per day (mmscmd). The recoverable reserves have now been revised at 10.03 Tcf with a peak production rate of 80 mmscmd," DGH said.
RIL has however created sub-sea capacities to handle 120 mmscmd to accommodate any future discoveries and upsides from the same block.
At government approved gas price of $4.2 per mmBtu, the total revenues over the life of the field would be $38.30 billion (Rs 187,670 crore). After deducting capital and operating expenses, the total profit petroleum over the life of the field would be $25.30 billion, DGH stated.
RIL has 90 per cent stake in the KG-D6 block while Canadian Niko Resources had the remaining 10 per cent.
