Petroleum ministry urges CAG for special audit of oil & gas blocks
November, 23rd 2007
The petroleum ministry has asked the Comptroller and Auditor General of India (CAG) to conduct special audits of the oil and gas blocks awarded to companies under the pre-NELP and NELP regime. This will be in addition to regular audits.
As some of the blocks have large government stakes in the form of royalty and profit petroleum, concerns have been voiced recently over the capital expenditure being incurred by some contractors in developing projects awarded under NELP.
The most recent instance relates to the doubling of capital expenditure in the Krishna-Godavari basins D6 block of Reliance Industries Limited (RIL) to over $11 billion from $5.2 billion. Although RIL also doubled its gas production profile from the earlier 40 million metric standard cubic meters a day (mmscmd) to 80 mmscmd, eyebrows were raised over the significant companys significant jump in capital expenditure.
Sources revealed, besides the D6 block of RIL, the audit by CAG would also cover some of the recent discoveries announced by ONGC and GSPC in the K-G basin.
Keeping in view the recommendations (of the Cabinet secretary), the large stakes of the government and the sensitivity of the matter, we request that CAG may conduct special audits of the blocks for the years for which regular audit has already been carried out, petroleum secretary MS Srinivasan wrote to the CAG, VN Kaul, on November 13.
The production-sharing contracts for the blocks provide a mechanism for monitoring costs and audit by a qualified firm of recognised chartered accountants. It was, however, recently mentioned by the Cabinet secretary in his report on pricing of gas produced from RILs D6 block that the existing monitoring and audit mechanism of the government needed to be strengthened.