RIL challenges CAG charges on KG-D6 field

RIL said in a statement that it had engaged global consulting firm Ernst & Young (E&Y), IPA Inc, an industry leader in quantitative analysis of project management systems and Daniel Johnston & Co Inc, an independent US-based consulting firm with experience of working with 40 governments and numerous independent oil companies worldwide.

“The independent reports by E&Y, IPA and Daniel Johnston entirely validate RIL’s stand in its responses to CAG. The independent nature of these studies conducted by globally reputed consultants has acknowledged RIL’s commendable efforts in bringing to stream India’s first deep water hydrocarbons production facility in record time,” it said.

Ernst & Young found “no evidence suggesting that KG-D6 costs were overstated” or that vendors paid RIL back after inflating costs. The US-based Daniel Johnston said that the RIL proposal to declare the entire KG-D6 block as discovery area, which was accepted by the upstream regulator DGH and subsequently by the Oil Ministry, was supported by technical data and good international petroleum industry practice.

CAG in its final audit report for KG-D6 that was tabled in Parliament, on Friday, had faulted the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), for allowing RIL 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.

The Production Sharing Contract (PSC) provided for 25 per cent of the area to be relinquished at the end of exploration phase but this did not happen as the entire block was declared a discovery area.

Daniel Johnston report that RIL put on its website said that the geological data suggested the entire KG-D6 block was connected by channels and fans that were visible in the first discovery in the area.

The primary purpose of relinquishment provisions is to encourage aggressive and efficient exploration efforts. “This is fully consistent with the extensive exploration activity undertaken by RIL. Their drilling activity, seismic data acquisition, processing and interpretation and petrophysical studies were extensive,” it said.

Singapore-based Independent Project Analysis Inc said that Reliance’s revising of initial development cost of $2.4 billion to $8.8 billion “was driven by changes in reservoir information” and was “not atypical”.