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| ADAG questions DGH statement on gas-field cost |
| Press Trust of India / Mumbai Aug 05, 2009, 18:50 IST |
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Anil Dhirubhai Ambani Group (ADAG) today questioned oil field regulator DGH's statement that Reliance Industries' (RIL) gas field expenditure has been validated, saying a firm appointed to verify the development cost had conflict of interest with RIL.
Reliance Power CEO J P Chalsani, at a press conference called here, said that Mustang Engineering, which had been appointed by DGH to validate the cost, has been advising RIL on various projects.
RIL's capital expenditure for development of Dhirubhai 1 and 3 gas fields in the KG-D6 block had increased from $2.47 billion proposed in 2004 to $8.8 billion in 2006 while production only doubled to 80 million standard cubic meters per day (mmscmd), he said, adding that when production doubles the cost does not double factoring the economics of scale.
DGH had yesterday said that the increase in D6 capital expenditure was warranted as production facilities were increased from 40 mmscmd to 120 mmscmd and field life was increased from 9 years to 13 years.
The government, Chalsani said, because of inflated capex stands to lose Rs 30,000 crore revenue as RIL is entitled to recover the entire cost before sharing revenues with the government.
Chalsani also also questioned the role of Directorate General of Hydrocarbons (DGH), saying DGH according to Petroleum Ministry was only an advisory body.
DGH had said the increase in capex was also partially due to inflationary trend in the E&P equipment and service industry.
DGH Director General V K Sibal had pointed to a Goldman Sachs Report on Global Finding and Development Costs of 2008 which states that "out of 32 deep water projects developed in the world, D6 ranks amongst the lowest in terms of costs and amongst the fastest in terms of time from discovery to production".
Sibal said Mustang Engineering was hired through an international bid. Besides Mustang, P Gopalakrishnan, an upstream expert, had independently validated the cost.
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