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RIL gets oil ministry nod to up KG output

business Updated: Oct 24, 2012 21:01 IST
Anupama Airy
Anupama Airy
Hindustan Times
Oil Ministry

In what is likely to be an end to months of intense stand-off, the petroleum ministry has given its nod to Mukesh Ambani-led Reliance Industries Ltd’s (RIL’s) plans to raise natural gas output from the flagging Krishna Godavari (KG)-D6 block, India’s largest gas producing block off the east coast.

The move assumes significance as after the ministry’s nod, RIL can now implement urgent remedial measures at KG-D6 where output has dipped by more than 55% in past two years to about 26 million standard cubic metres per day.

In a October 23 letter to RIL, a copy of which is available with HT, the petroleum ministry stated that “all the government nominees” on the KG-D6 block oversight committee have “already approved” all the development proposals made by RIL.

Alongside, the petroleum ministry has also agreed to RIL’s demand that the Comptroller and Auditor General of India (CAG) should limit itself to doing a financial audit and not a performance audit of the company’s KG-D6 gas block.

“...the proposed audit would be under Section 1.9 of the accounting procedure of the Production Sharing Contract, and not a performance audit of the operator (RIL),” the ministry wrote.

On the same day, the ministry also wrote to principal director of audit, economic and service ministries, CAG stating that “subject to certain conditions, RIL has agreed for an audit under Sector 1.9 of accounting procedure of the PSC by the CAG and to cooperate with such audit without prejudice to any of their rights and contentions.”

The petroleum ministry had been withholding approvals to RIL’s investment plans saying the company must first agree to CAG doing a second round of audit of KG-D6 field for the 2008-09 to 2011-12 period.

RIL had stated that it was ready for a CAG audit if done under the PSC.

The ministry finally agreed to RIL position. The ministry wrote to RIL “to take necessary actions” on the items approved by the management committee.