Clashing over Reliance Industries's gas field cost, an Anil Ambani group firm on Wednesday questioned the credibility of audits commissioned by the Directorate General of Hydrocarbon, evoking sharp protest from the regulator.
ADAG firm Reliance Power today alleged that there was a conflict of interest between the experts who carried out the validation and the contractor (RIL) for approving the Rs 45,000 crore (Rs 450 billion) field development costs.
RPower CEO J P Chalsani said Mustang Engineering has been advising RIL on various projects, while P Gopalakrishnan, the other independent expert, was on faculty of the School of Petroleum Technology, which is chaired by RIL chairman Mukesh Ambani.
None of the two experts could be contacted for comments. The government, he said, stands to lose Rs 30,000 crore (Rs 300 billion) revenue because of the inflated capex, as RIL is entitled to recover the entire cost before sharing revenues with the government.
DGH director general V K Sibal said in New Delhi that RIL's cost of gas production even after higher capex was comparable to any other field in the country.
On the experts, he said Mustang was selected through an international bid, while Gopalakrishnan was on DGH's panel.
The cost of production for Dhirubhai 1 and 3 fields at the approved field development cost of $8.836 billion came to $1.28 per million British thermal unit, he said.
Chalsani questioned DGH's stature, saying according to the petroleum ministry was only an advisor to it.
He said RIL's capital expenditure for development of gas fields 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.
When production doubles the cost does not double factoring the economics of scale, he noted.
"Simply put, the more RIL claims to have spent on capital expenditure, the less the government gets as its share from the revenues and more delayed is the timing when the government gets its revenues," Chalsani said, demanding that the report of CAG on D6 fields audit be made public.
DGH has 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.
Sibal said the production cost too compares to the $1.25 per mmBtu cost of gas from Tapti field operated by BG Group of the UK and $1.12 per mmBtu from Hazira field of Canada's Niko Resources.
"I don't want to join issues with them but you should let people who know this subject decide on the issue," Sibal said.
"If Rs 45,000 crore capital expenditure claimed by them was inflated, the cost of production in terms of cost per million British thermal unit would also come higher."
