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Reliance’s cost of production doubled in 2 years: CAG report

23 Jun 2011 Evaluate

Reliance Industries investment plan shows cost of production increased by $3billion. The cost increased from $2.39 billion to $5.19 billion as per the Comptroller and Auditor General's draft report estimates. Since companies are allowed to recover their capital expenditure before paying to government, it has decreased government’s profits. Reliance in 2002 discovered the field and submitted report envisaging 40 mcmd (million cubic metres per day) of gas, however, later revised it to 80 mcmd.

The daily rig rate also increased up to $500,000-550,000 around the year 2006 from $110,000-120,000 in 2004 and service cost increased by $125,000 to $150,000. The company also added development concept in 2003 after the discovery in 2002 which required new data and domain knowledge from experts, this increased the expenditure. Increase in cost of other factors include - development wells (from $944 million in initial plan to $1.16 billion in revised plan), production facilities ($1.34 billion-$2 billion), subsea control systems ($358 million-$722 million), deepwater pipeline ($142 million-$323 million), onshore terminal and site grading ($192 million-$550 million), control-cum-riser platform ($0-$446 million).

The response from the Petroleum and Natural Gas Minister S. Jaipal Reddy is awaited on the Comptroller and Auditor General's draft report. The ministry has requested for 8-weeks time to submit the reply. The high-profile Chawla committee has also blamed ministry stating the projects like KG-D6 are designed to benefit private players like Reliance.

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