ADAG questions DGH statement on gas-field cost validation

ADAG questions DGH statement on gas-field cost validation

Mumbai: Anil Dhirubhai Ambani Group (ADAG) on Wednesday questioned oil field regulator DGH’s statement that Reliance Industries’ gas field expenditure has been validated, saying a firm appointed to verify the development cost had conflict of interest with RIL.

Reliance Power CEO J P Chalsani, at a press conference called here, said that Mustang Engineering, which had been appointed by Directorate General of Hydrocarbons (DGH) to validate the cost, has been advising RIL on various projects.

RIL’s capital expenditure for development of Dhirubhai 1 and 3 gas fields in the KG-D6 block had increased from $2.47 billion proposed in 2004 to $8.8 billion in 2006 while production only doubled to 80 million standard cubic meters per day, he said, adding that when production doubles the cost does not double factoring the economics of scale.

DGH had on Tuesday said that the increase in D6 capital expenditure was warranted as production facilities were increased from 40 mmscmd to 120 mmscmd and field life was increased from 9 years to 13 years.

The government, Chalsani said, because of inflated capex stands to lose Rs30,000 crore revenue as RIL is entitled to recover the entire cost before sharing revenues with the government.