DGH gives clean chit to RIL’s D-6 gas capex: report

The directorate of hydrocarbons (DGH) has reportedly found no fault with Reliance Industries Ltd's capital expenditure of $2.5 billion spent up to 2007-08 in developing the Krishna-Godavari D6 gas fields because the Comptroller & Auditor General's audit has not quantified any loss to the exchequer.

The directorate, which acts as the technical advisor to the petroleum ministry, told the government that the CAG will now inspect accounts of RIL-operated D6 block since 2008-09 and if it quantifies any illegitimate expenditure, the same will be recovered from the company, The Economic Times reported today citing officials in the oil ministry and the DGH.

Cost recovery is the key plank of the new exploration and licensing policy (NELP) that invites companies to bid for oil and gas blocks. Under the NELP, the risk is borne entirely by energy firms. They have sunk about $9 billion of risk capital in Indian basins, out of which $7.2 billion has been lost in unsuccessful drilling and the companies do not get any compensation for this.

Companies that make commercial discoveries are allowed to recover the entire exploration and development cost from the field's revenue before sharing profit with the government.

"The government can recover any amount indicated by CAG in its subsequent audits from RIL, as field-life of the D6 block is more than 20 years," said a DGH official who did not wish to be named. He said accounts of D6 block is verified up to 2007-08 by CAG, hence it did not require any further examination. "Audit review is the prerogative of CAG and cannot be duplicated by the oil ministry," he told the paper.

Spokesmen of the oil ministry, CAG, RIL and the director general of hydrocarbon, S K Srivastava, did not respond to email equerries.