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Auditor targets inflated oilfield costs

Auditor targets inflated oilfield costs
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First Published: Mon, Jun 13 2011. 07 14 PM IST
Updated: Mon, Jun 13 2011. 07 14 PM IST
New Delhi: India’s oil ministry will reply within two weeks to criticism from the state auditor that it had allowed some explorers to overstate costs of field developments and explore beyond their contracted areas, a source at the ministry said on Monday.
The Comptroller and Auditor General’s (CAG) report said Reliance Industries had inflated development costs on its D6 block in the Krishna-Godavari basin, according to reports in two Indian newspapers.
The CAG also cited a joint venture of Reliance with BG and ONGC for hiking development costs in the Panna-Mukta and Tapti gas fields, the newspapers added.
The CAG report also said Cairn India Ltd had been allowed to explore additional areas not stipulated in its contract for the RJ-ON-90/1 block, the Hindustan Times said.
The CAG report is a draft which has been sent to the oil ministry for comments, the newspapers said.
A senior oil ministry source said they had two weeks to reply to the CAG report.
“(The) companies concerned, accused of so many things, will also reply. It will culminate in an exit conference,” the source said on condition of anonymity given the sensitivity of the issue.
“Then in the light of these views Comptroller and Auditor General will finalise the report.”
The Times of India and the Hindustan Times both said the CAG report focused on Reliance.
“The undue benefit granted to the contractor (Reliance) is huge, but cannot be quantified,” the report said, according to the Hindustan Times.
“The (oil ministry and upstream regulator) facilitated the desires of the contractor (Reliance),” the Hindustan Times added, again quoting from the report.
While no immediate comment was available from Cairn India on the reports, Reliance said in a statement that it had complied with the requirements under the contract with the government.
“Reliance Industries strongly affirms that as a responsible operator, it has fully complied with the requirements in the (production sharing contract) at all times in conducting petroleum operations, and refutes any suggestion to the contrary,” the statement said, adding it had not yet received a copy of the CAG report.
“The KG D6 project is a significant contributor to the country’s economy and has been globally acclaimed for its cost effective, speedy, flawless execution and smooth commissioning,” the statement added.
Reliance is already facing criticism for pumping less gas than it should from the key D6 block, one of the biggest gas producing blocks in India.
Cairn Energy is trying to sell a controlling stake in its India unit to Vedanta Resources , but the deal has run into problems over royalty issues.
The CAG report comes at a time when the Indian government is struggling to fend off allegations of massive corruption in awarding of telecoms licences that may have resulted in revenue losses worth billions of dollars.
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First Published: Mon, Jun 13 2011. 07 14 PM IST