RIL to return 25% of D6 block to govt

Written by Nistula Hebbar | Nistula Hebbar | New Delhi | Updated: Feb 4 2012, 11:11am hrs
Executives of Reliance Industries (RIL) on Friday gave an undertaking to the Public Accounts Committee (PAC) of Parliament that it would return 25% of its D6 block in the Krishna Godavari basin to the government.

RIL also complained to the PAC that the Comptroller and Auditor General of India (CAG) did not give them a fair hearing while taking the view that it was against the contract that RIL was allowed to retain the entire area of the KGD6 block as discovery area without having to relinquish a fourth of it after the first and second exploration phases.

RIL executive director PMS Prasad, who led the company delegation was quite emotional after his presentation before PAC members reportedly saying, The territory you are talking about is not land but open sea, its not that we are real estate sharks.

The CAG had said last September that licenses assigning oil and gas blocks to companies are designed to make contractors fully explore the given area within a time frame and relinquish areas of poor prospects, so that they could be auctioned again to firms with better technology and risk appetite.

The petroleum ministry should therefore, correctly delineate the discovery area by excluding 25% of it at the end of the two exploration phases, treating the subsequent discoveries as invalid, the CAG told the Parliament. Independent consultant Johnston & Co engaged by RIL to review its work in the KG basin, however, said the upstream regulator's decision to treat the entire block as a discovery area was a reasonable decision fully supported by data and the situation.

Prasad complained that the CAG did not give the company a fair hearing on the matter before finalizing the report on the KG Basin. Company executives said that when the exploration started, the cost of oil was $ 27 per barrel and in patches it touched a peak of $ 148 a barrel. Cost escalation, company executives said, had happened in several countries.

PAC chairman Murli Manohar Joshi reportedly told RIL executives that the committee would give them a patient hearing and that the company need not worry that members would not understand technical details. There are former ministers and future ministers present in the committee, please go into technical specifications, he reportedly told the RIL team.

Company executives then showed a nine minute short film on the KG Basin exploration, putting their point across that the private sector tie up was done to encourage investment in the field. Price escalation does not benefit the contractor, contrary to what the CAG is claiming, company executives told the committee.

The PAC had questions about the 3D seismic surveys used by the company in locating oil reserves. RIL informed the committee that case studies of Canada and Brazil were available on this technique.

The PAC has asked that the company furnish these case studies. Company officials have been asked to appear again before the PAC.