ADAG ads maliciously slanted, RIL tells oil ministry
25 Aug 2009
In a riposte to the directly aimed ad campaign launched by Anil Ambani's Reliance Natural Resources Ltd, the Mukesh Ambani-controlled Reliance Industries Ltd has told the oil ministry that the development cost of its Krishna-Godavari basin project is among the lowest in the world.
The Anil Dhirubhai Ambani Group had earlier unleashed a series of advertisements claiming, among other things, that the ''shockingly disproportionate'' increase in the capital expenditure for the KG gas field could result in a loss of up to Rs30,000 crore to the government.
The advertisement also alleged that RIL's agreement with the government may lead to a hike in retail power price by Re1 per unit.
Terming the campaign as ''malicious, baseless, mischievous and ill-informed'', RIL's president and chief executive officer petroleum P M S Prasad wrote to petroleum secretary R S Pandey oil secretary on 20 August, saying the hike in capital expenditure from Rs12,000 crore to Rs45,000 crore was due to a combination of factors, such as an increase in reserves by over 2.5 times, trebling of production facilities, doubling of peak production, increase in the number of wells, and inflation in the equipment and services industry.
In his letter, written a day before he was inducted onto the RIL board, Prasad said a Goldman Sachs study had verified that RIL's development cost of $5 a barrel was among the lowest in the world, and better than that of its peers in India. Prasad mentioned that UK oil firm Cairn India's development cost for the MARS and Bhagyam fields was estimated at $9 per barrel of oil equivalent.
He said the cost and profit in a production-sharing contract are not dependent on capex estimates, and there are well-informed systems of checks and balances to monitor actual cost recovery. ''The government, anyway, has the power to veto all management committee decisions and, hence, no approvals or decisions can be taken without the express assent of the government,'' he said.
According to the letter, the fact that the technical scheme of development and estimated capex was very competitive was validated by two independent expert agencies appointed by the director general of hydrocarbons. ''However, to demonstrate the transparency and openness of systems ... RIL has also agreed to a special audit by the Comptroller and Auditor General of India.''
Prasad added, ''Certain parties are bent upon holding the country's pride 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.''
