'Appoint expert on RIL gas field costs, expedite CAG audit'

Anil Ambani group today questioned Mukesh Ambani-led RIL's explanation on over three-fold jump in costs to $8.83 billion for developing gas fields, and asked the government to expedite the CAG audit and appoint an international expert to revalidate the expenses.

"RIL has once again made vague and general remarks in its letter (to the government) without providing any substantial material justifying why the capital expenditure on KG-D6 gas has gone up from Rs 12,000 crore to Rs 45,000 crore, when the production only doubled from 40 mmscmd to 80 mmscmd," ADAG said in a letter to the Petroleum Ministry.

Questioning the independence of independent experts appointed by Directorate General of Hydrocarbon (DGH) in the wake of "several complaints regarding the gold-plating" of costs, it suggested that a reputed international expert with experience in deep-water blocks should "revalidate the capex."

In a letter, that became public yesterday, RIL had hit at the Anil Ambani group for unleashing a "malicious, baseless, mischievous and ill-informed" propaganda against its gas field costs and said that the campaign should be nipped.

Anil Ambani group President A N Sethuraman said in his letter that RIL communication had dismissed the "the growing and well-argued opposition to this totally unjustified increase by attributing it to self-seeking vested interests who are ostensibly out to malign the KG D6 project."

Listing out a series of discrepancies, as reported in the media, ADAG requested the Petroleum Ministry "to ensure expeditious completion of the CAG Audit.

"While this full and comprehensive audit is on, the Ministry should publicly disclose the CAG's current findings as well as the identity of other auditors involved in the exercise, if any, and their terms of reference."     

In its letter, RIL had said that capital expenditure for KG-D6 fields increased from $2.47 billion in 2003 to $8.83 billion due to a 2.5 times increase in reserves, trebling of production facilities, doubling of peak production, hike in number of wells, field life and inflation in equipment and services industry.    

The ADAG, in its communication, quoted media reports to say that "RIL's rampantly inflated capital expenditure" has been questioned by a committee of secretaries headed by the Cabinet Secretary K M Chandrasekhar, as also the Prime Minister's Economic Advisory Council.    

ADAG said that the independence of international engineering consultant, Mustang Engineering, has also been questioned due to its association with RIL.

"Months after Mustang Engineering gave a clean chit on capex, it was rewarded with a multi million dollar contract by Reliance for design and project management services of the Panna Field, which is a part of the PMT fields run by the consortium of RIL and others," the ADAG letter said.