RILs KG-D6 output plan approved

Oil Ministry also okays toning down of CAGs audit terms

Listen to this article

00:00

1x 1.5x 1.8x

Holding out hope for the future of Reliance Industries showcase KG-D6 hydrocarbon assets and Indias mining and energy industries,the government and the company have agreed on a development plan for the block,which has seen a precipitous decline in gas output.

The RIL-BP consortium can now go ahead with the investments needed to boost KG-D6 output with the oil ministry approving budgets for three years starting 2010-11 and toning down some of the rhetoric on the audit of the block by the CAG. The ministry wrote to the auditor on this on Tuesday. The CAG is yet to reply as it hasnt studied RILs conditions.

The move could eventually lead to a reversal in the steady fall in gas production from the block,which is yielding only 29 million cubic metres a day mmscmd now against the original estimate of 80. A recovery in gas production from the field could improve Indias mining output and provide vital fuel linkage to several power and fertiliser projects now on the back-burner for want of fuel.

Sources said the oil ministry has communicated to RIL that all government nominees on a statutory panel overseeing the D6 block have endorsed the budgets a few days ago and asked the consortium to take necessary steps to boost production. The oil ministry has also accepted the companys suggestion that the CAG audit has to be a financial one as per section 1.9 of the accounting procedure in the production sharing contract between the company and the government.

Sources said the ministry has also approved a revised field development plan for the MA field and asked the company to provide CAG access to all accounts required under the PSC to the governments auditor without delay. The auditor had earlier told Parliament that the revision in capital expenditure from 2.39 billion to 8.8 billion for the D1 and D3 discoveries by Reliance casts doubts on the robustness of the data and assumptions underlying the development plan. The subsequent decline in gas output also led to an arbitration between the government and the company.

According to industry sources,the scope of the audit terms the government has agreed to may be much less compared with that conducted by the CAG earlier. Under this,the company cannot be asked to produce documents,clarifications or information on matters outside the scope of what has been prescribed under section 1.9 of the contract.