New Delhi: With Reliance Industries and its partner BP Plc warning of further drop in KG-D6 gas output in absence of investments approvals, the Oil Ministry on Tuesday hit back saying it had not approved annual spending because the Mukesh Ambani firm had denied CAG access to its books.
RIL Executive Director PMS Prasad and BP India head Sashi Mukundan met Oil Minister S Jaipal Reddy for nearly three and half hours on Friday to highlight the exigency facing the flagging KG-D6 fields due to his ministry not approving annual budgets and capital spending for three years, sources said.
An oil ministry statement said the Comptroller and Auditor General (CAG), which is carrying out audit of spending on KG-D6 block from 2009-10 to 2011-12, had "recommended withholding of sanction for annual work plans and budgets if access to records is denied to CAG".
CAG had submitted audit of KG-D6 for 2006-07 to 2008-09 to the Parliament in September last year and RIL's "denial of access to records to the CAG was adversely commented upon in the previous audit," the statement.
While the CAG audit report was submitted in September last year, sources said the oil ministry-controlled block oversight committee has not approved budgets and work programme for 2010-11, 2011-12 and 2012-13.
The Management Committee (MC), which is headed by Directorate General of Hydrocarbons (DGH) and includes a senior official of the oil ministry, is to approve spending before beginning of a fiscal.
Oil Ministry sources said RIL was denying CAG access to all its records for subsequent audit as it had disputed the scope of audit. RIL says CAG cannot do a performance audit.
"The representatives of RIL and BP met Reddy on July 13 and represented for speedy clearances in four of the blocks - NEC25 in Mahanadi Basin, KG-D6 and two in Cauvery basin," the statement said.
"It was agreed at the meeting to recommend to the competent authority on two issues namely the Declaration of Commerciality of certain wells in the NEC-25 and KG-D6. Company representatives were told that the Ministry would consider extension of appraisal period to facilitate the declaration of commerciality at an early date," it said.
RIL-BP at the meeting, which was also attended by Oil Secretary GC Chaturvedi, Joint Secretary (Exploration) Giridhar Aramane and Directorate General of Hydrocarbon (DGH) Director General
Rajiv Nayan Choubey, said output at KG-D6 will continue to fall in absence of interventions.
KG-D6 output this week has dropped to below 30 million standard cubic metres per day (mmscmd) and is projected to further fall to 20 mmscmd by next year.
Gas output dip, from 61.5 mmscmd achieved in March 2010, has pulled down power generation and industrial production.
Besides budgets, the Management Committee (MC) has not approved revised field development plan for MA oilfield in the same Krishna Godavari basin KG-DWN-98/3 or KG-D6 block in Bay of Bengal.
Also, the MC has refused to recognise at least three gas discoveries in the block, impeding preparation of a field development plan to bring them to production.
While MC is supposed to meet at least once a quarter, RIL-BP's request for convening meeting of the panel has not even been acknowledged on past 6-7 occasions.
The ministry statement said Reddy promised to expedite clearances for four investment proposals of RIL.
"The contractors (RIL-BP) were also informed that denial of access to records to the CAG was adversely commented upon in previous audit by the CAG. It was also brought to their notice that CAG recommended withholding of sanction to work plans and budgets if access to records is denied to CAG.
"Therefore, the company representatives were requested to make all the records and accounts of the KG-D6 block available to the Comptroller and Auditor General as provided for in the Production Sharing Contract (PSC)," the statement added.
Sources said RIL-BP told Reddy that well interventions at the currently producing Dhirubhai-1 & 3 fields and MA oilfield can potentially add 0.8 trillion cubic feet if a capital expenditure of USD 543 million for 2012-13 is approved.
Listing six interventions they had planned in the KG-D6 to arrest output decline, RIL-BP said these were "critical to the maintenance of production at the current levels" but have so far not been approved by the block Management Committee.
RIL-BP, Prasad and Mukundan said, had been conducting petroleum operations and incurring contract costs without an approved work programme and budget since April 1, 2011.
First Published: Tuesday, July 17, 2012, 18:15