Wednesday, October 26, 2011

After CAG, oil sector under CBI scanner

India | Updated Jun 14, 2011 at 08:39pm IST
After CAG, oil sector under CBI scanner
Meetu Jain, CNN-IBN

New Delhi: The CBI on Tuesday stepped in to investigate the alleged flouting of policy by Mukesh Ambani led Reliance Industries Limited(RIL). Irregularities in the policy were highlighted in the draft in the Comptroller Auditor General (CAG) Report leaked to the media on Monday.

CNN-IBN gained access to the CBI documents which asked the Oil Ministry to send across files related to the KG D6 oil fields.

The CBI has, now, asked for files relating to approvals to RIL for increasing its capital expenditure from $ 2.4 billion to $ 8.8 billion.

The CBI is also looking at files relating to the vigilance inquiry against former DG Hydrocarbons, V K Sibal.

The investigative agency is probing why the exploration period was extended beyond original schedule for both RIL and ONGC.

The CAG in its report said that the government had favoured Mukesh Ambani's RIL and two other oil exploring companies.

The CAG report also mentioned that the oil ministry and its regulatory arm - the Directorate General of Hydrocarbons (DGH) - allegedly favoured at least three explorers.

The report alleged that the government allowed Ambani's RIL to violate terms of its contract with the government for exploration in the Krishna-Godavari basin.

This was the first ever audit of private sector participation in the oil sector.

The CAG report also stated that the Directorate General of Hydrocarbons had allowed RIL to violate norms.

The violation of terms, in turn, helped RIL increase its capital expenditure plan to start production from the Krisha-Godavari basin. Sources say that 70 per cent of the draft CAG report is devoted to RIL alone.

The premier auditor, whose report will be tabled in Parliament after incorporating comments from the Oil Ministry, said Reliance never had intention of developing the KG-D6 gas fields as per the initial cost estimates as it did not initiate tendering for equipment as per the original plan.

"Most procurement activities were undertaken late, in line with the schedules of the IDP of May, 2004, clearly evidencing that the operator had no intention of complying with these timelines," the draft report said.

"By contrast, activities in respect of items in the AIDP were initiated even before the submission/approval of the AIDP," it said.

The CAG said the submission of an addendum to the initial development plan (IDP) instead of a revised comprehensive development plan, as well as lack of adequate details with regard to the Phase-II development cost of $ 3.3 billion, made it virtually certain that the operator will submit more addendums.

"The DGH also approved the AIDP, without questioning why the operator did not take action in-line with the already approved IDP," it said.

The report also said that the ministry and DGH allowed Reliance to enter successive exploration phases without the stipulated relinquishment of area and then allowed it to declare the entire contract area as "discovery area".

This was both "irregular and incorrect", since drilling of wells and consequential discoveries had not taken place in the major portion of the contract area, the CAG said.

"We recommend that government should re-examine delineation of the entire contract area as 'discovery area' and take immediate steps for relinquishment of excess area in line with the provisions of the PSC, as also fix accountability for those responsible for this decision," it


The CAG said the benefit granted to Reliance is huge, but cannot be quantified. It also found a "similar irregular determination of the entire contract area" as 'discovery area' in the case of another block operated by Reliance, dubbed KG-OSN-2001/2.

The CAG's scope of audit covers the Production Sharing Contract (PSC) in respect of the KG-DWN-98/3 (KG-D6) block awarded to Reliance for two financial years - 2006-07 and 2007-08 - with access to the records of previous years linked to the transactions of these years.

With additional information from PTI


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