RIL wants ADAG`s `malicious` ad campaign nipped in bud

Reliance Industries Terming as `malicious, baseless, mischievous and ill-informed` the advertisment propaganda by Anil Ambani Group on its gas field capex.

Updated: Aug 24, 2009, 14:00 PM IST

New Delhi: Terming as `malicious, baseless,
mischievous and ill-informed` the advertisment propaganda by
Anil Ambani Group on its gas field capex, Reliance Industries
has stated that the development cost was the lowest in the
world and compares favourably to any other project in India.

RIL President and CEO (Petroleum) PMS Prasad on August 20
wrote to Oil Secretary R S Pandey, saying "certain parties are
bent upon holding the country`s price and national interest
hostage to their own narrow commercial interests and are
stopping at nothing to destroy the reputation of the country."

"It is necessary to nip these malafide endeavours in the
bud for the sake of the energy security of the country," wrote
Prasad and was a day later appointed to the board of RIL.

He said the capital expenditure for developing Dhirubhai-
1 and 3 fields in KG-D6 block had gone up from USD 2.47
billion in 2003 to USD 8.83 billion because of increase in
reserves by over 2.5 times, trebling of production facilities,
doubling of peak production, increase in number of wells,
field life and inflation in equipment and services industry.

"Despite the increase in costs, Goldman Sachs` study of
the major E&P projects across the world verifies that the
finding and development costs of about USD 5 per barrel of oil
equivalent are amongst the lowest in the world," he said,
listing F&D cost of a host of projects by global majors.

The KG-D6 cost also compared favourably to Cairn India`s
Rajasthan oilfields - the other major project being developed
in the country currently, Prasad wrote.

The cost of developing MARS and Bhagyam onland oil
discoveries is estimated to be USD 3.6 billion for an
estimated recoverable reserve of 390 million barrels of oil,
which is about USD 9 per barrel of oil equivalent compared to
about USD 5 per barrel for RIL`s deepsea gas field.

"We deeply resent all attempts being made to belittle the
achievements of scores of dedicated professionals and
regulators who by their tireless efforts have made this
stupendous achievement possible in such a short time," he

"It saddens us that self seeking vested interests... are
also casting aspersions on one of the world`s most transparent
and fair policy regimes which has been recognised as such, all
over the world."

RIL said the advertisement campaign was an attempt to
destroy value created in the project and "maliciously harm the
country`s reputation as an investment destination" and delay
and disturb the systematic development of the field.

The increase in capex, it said, was concomitant on a
massive expansion in the scope of work and debilitating market
conditions that set in as crude prices broke all records.

"Ultimately cost and profit share in a Production Sharing
Contract (PSC) regime are not dependent on capex estimates but
have well informed systems of checks and balances to monitor
actual cost recovery," Prasad wrote. "This includes tendering
procedures, approvals by the Management Committee or the
Government, statutory audits, and audit by the Government
under the PSC."

RIL stated that two independent experts appointed by DGH
had validated the technical scheme for development and
estimated capex as very competitive.

"However, to demonstrate the transparency and openness of
systems as operated by us within the PSC in accordance with
the best international petroleum industry practices, RIL has
also agreed to a special audit by CAG proposed by the
Government," he stated.

"This totally unprovoked and unjustified attack on the
credibility of the project, the Government of India and RIL by
vested interests having little understanding of any mega
project execution, leave alone complex deepwater projects in
the E&P industry, has only strengthened our resolve and
commitment to completely dedicate ourselves and our team of
professionals to make the development of KG-D6 block an
unparallelled success story for India," he stated.

Bureau Report