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Petroleum ministry let RIL retain D6 block

Last Updated 08 September 2011, 18:33 IST

The country’s top auditor in its performance audit of Hydrocarbon Production Sharing Contracts, tabled on the last day of monsoon session of Parliament, did not comment on whether the capital expenditure for KG-D6, being raised from $ 2.4 billion proposed in 2004 to $ 8.8 billion in 2006, was unjustified or inflated.

Calling for revamping of the profit sharing arrangement from oil and gas blocks, the report said production sharing contracts between the government and operators were designed to encourage increasing capital expenditure by private contractors, which reduce the government’s share.

The CAG report specifically found fault with Reliance, the operator for the KG-DWN-98/3 block in the area, saying it was allowed to violate terms of its production sharing contract for its blocks in the KG Basin.

The auditor also found fault with the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), for allowing Reliance to retain the entire 7,645 sq km KG-DWN-98/3 (KG-D6) block in the Bay of Bengal, after the giant Dhirubhai-1 and 3 gas finds were made in 2001.

As per the PSC, Reliance should have relinquished 25 per cent of the total area outside the discoveries in June, 2004 and 2005, but the entire block was declared as a discovery area and the company was allowed to retain it. Had Reliance relinquished some least priority areas in the KG block, the government could have given it to other companies for further exploration.

It also said Reliance raised its estimated capital expenditure for the D1 and D3 gas discoveries in the KG basin, but most procurement activities were undertaken later than had been agreed under an initial development plan.

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(Published 08 September 2011, 10:06 IST)

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