CAG meets oil explorers, DGH in ‘exit conference’

13 Jul 2011

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The Comptroller & Auditor General of India (CAG) met private oil and gas explorers Reliance Industries Ltd (RIL), Cairn India and British Gas, as well as representatives of the Directorate-General of Hydrocarbons, the upstream regulator, in an 'exit conference' on Tuesday, to respond to CAG findings about violation of rules and unjustified escalation of exploration costs by these companies.

According to a draft report by the CAG in conducting an audit of exploration costs in the RIL-operated Krishna-Godavari D6 block, the company hiked exploration cost for the block from $2.4 billion initially proposed to $8.8 billion. This includes $5.2 billion to be spent in first phase, followed by an additional $3.6 billion in the second phase.

The national auditor has rapped oil ministry and the oil regulator for approving these costs, which would reduce the government's share of profit from these offshore and inland fields (See: Government favoured RIL, others in gas exploration contract: CAG). The exit conference was held before the CAG finalises its report, which will be tabled in Parliament.

Apart from RIL, the CAG has also audited Cairn India-operated blocks in Rajasthan and the BG-operated Panna-Mukta-Tapti fields in the western offshore area.

P M S Prasad, executive director of RIL, represented the company. Denying the CAG allegations, RIL has previously pointed out that KG-D6 is quite cost-effective when compared with similar projects globally. The company's team offered a complete reply to the CAG draft over a session that lasted more than an hour. Prasad didn't speak to the media after the meeting.

BG India managing director and president Walter Simpson, said after appearing for the company, ''Respecting the sanctity of CAG's position, we keep our conversation confidential.''

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