Reliance discoveries approved without enough appraisal, says CAG

Mar 09 2014, 21:59 IST
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SummaryThe Comptroller & Auditor General has said the oil ministry and its technical arm DGH approved notification of now flagging gas discoveries

The Comptroller & Auditor General has said the oil ministry and its technical arm DGH approved notification of now flagging gas discoveries in RILís KG-D6 block despite the company not doing enough appraisal.

RIL had found gas in the Dhirubhai-1 and 3 wells in October 2002 and were declared commercially viable finds between April 2003 and March 2004. It in May 2004 claimed the finds to hold 8.3 trillion cubic feet of inplace gas reserves, the CAG said in a draft audit report of KG-D6 block.

The DGH approved a $2.47-billion initial development plan for the two finds by lowering the inplace reserves to 5.45 tcf and recoverable resource to 3.81 tcf with first gas coming in August 2006. However, before the start of commercial production, RIL in October 2006 submitted changes in the development plan by raising the capex requirement to $8.8 billion in two phases and putting recoverable reserves at 12.04 tcf out of inplace volumes of 14.164 tcf.

A management committee, comprising representatives of the DGH, the oil ministry and the operator, in December 2006 approved the revised plan putting recoverable reserves at 10.03 tcf and doubling of output to 80 million standard cubic metres a day. However, the fields, which began production in April 2009, did not behave as predicted and output slumped within a year, forcing RIL and its new partner BP to restate the reserves at 2.9 tcf.

The CAG said the production sharing contract stipulates that a contractor should submit an appraisal programme to reassess the extent of the discoveries. ďThere was no appraisal programme in respect of D1&D3 gas discoveries as required under PSC. The operator moved directly from discovery to commercial discovery, the CAG said in the report.Ē

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