Anil Ambani's charges invalid, says oil & gas field regulator

Oil & gas field regulator DGH, on Tuesday, rejected industrialist Anil Ambani’s charges that it had approved Reliance Industries Rs 45,000-crore “exorbitant capital expenditure” plan for gas fields, saying the actual expenditure is subject to three audits including one by CAG.

The Production Sharing Contract (PSC) provides for auditing of the actual expenditure by three sets of auditors — the management committee appointed auditors, government appointed auditors and by the Comptroller & Auditor General of India (CAG).

“The CAG team has carried out the audit work,” said Directorate General of Hydrocarbons Director General V K Sibal in a three-page post on the DGH’s official website. “The idea of gold plating betrays a lack of knowledge of business economics. Inflating the expenditure does not benefit any stakeholder- neither the contractor nor the government. No company would like to increase its investment unproductively. Every additional dollar of wasteful investment dents the profit of the contractor,” Sibal said without naming Anil.

Anil had on Monday demanded “an independent and objective re-examination by public accountability bodies like the CAG and the CVC of the apparently exorbitant capital expenditure of Rs 45,000 crore... in order that such capex recovery is brought down to realistic levels.”

The development cost or capital expenditure approved by a management committee comprising of representatives of petroleum ministry, DGH and companies concerned are broad, indicative numbers that are used to work out the economics of a project over its lifetime, DGH said.

There was no hasty approval of RIL’s revised expenditure and due diligence of revised expenditure by different agencies had been carried out. Sibal, however, stated that DGH had commissioned two independent studies to validate the capex proposed by RIL and both have concurred to the estimates made by RIL.

“This project happens to be the first deepwater development project in India. It is pertinent to mention here that the Dhirubhai gas discovery is the largest gas discovery in the world for the year 2002. In any other country, it would have been hailed and cherished. However, we are content with squabbling over this outstanding success,” Sibal said. In the opinion of the independent and reputed technical experts, RIL’s “development plan is highly cost effective and fast track,” he said, adding “a CAG audit has recently been completed.”

The Goldman Sachs Report on Global Finding and Development Costs 2008 clearly states that out of the 32 deep water projects developed in the world, D6 ranks amongst the lowest in terms of costs and amongst the fastest in terms of time from discovery to production.

“While criticism and dissent is an intrinsic characteristic of a democracy, it should not become the obsessive subject of endless public debate,” Sibal said. “Irresponsible and biased views and opinions are bound to send negative signals to the E&P companies across the world and cause irreparable damage to the growth and development of the oil and gas industry in India,” he added.

He appealed that “before criticising the actions of the DGH and the Government of India, it is important and essential to understand the issues in their entirety and in an unbiased manner.”  The global perception about India’s hydrocarbon endowment was rapidly changing with more investments and modern technology pouring in, he said, adding that the fair and transparent procedures and practices adopted by the DGH have resulted in creating an E&P brand image.

Make CAG report public
Expressing surprise over oil field regulator DGH’s observation that inflation of capital expenditure would not benefit Reliance Industries, Anil Ambani Group firm RNRL demanded that the CAG audit of the RIL-owned fields be made public for the sake of transparency.

“In the interests of transparency, and to set the matter at rest, DGH should publicly disclose full reports of CAG, Indian experts, international engineering consultants, and independent auditors,” RNRL said.