1.  Accounting Conventions
 
 The financial statements are prepared under the historical cost
 convention on accrual basis in accordance with Generally Accepted
 Accounting Principles (GAAP), applying the Successful Efforts Method as
 per the Guidance Note on Accounting for Oil and Gas Producing
 Activities issued by the Institute of Chartered Accountants of India
 and Accounting Standards issued under the Companies (Accounting
 Standards) Rules, 2006 and provisions of the Companies Act, 1956.
 
 2.  Use of Estimates
 
 The preparation of financial statements requires estimates and
 assumptions which affect the reported amount of assets, liabilities
 revenues and expenses of the reporting period. The difference between
 the actual results and estimates are recognized in the period in which
 the results are known or materialized.
 
 3.  Government Grants
 
 Government grants for acquisition of fixed assets are initially treated
 as Capital Reserve and are subsequently recognized as income in the
 Profit & Loss Account on a systematic basis over the useful life of the
 assets in the proportion in which depreciation on those assets is
 charged..
 
 4.  Fixed Assets
 
 4.1 Fixed assets are stated at historical cost less accumulated
 depreciation and impairment. Fixed assets received as donations/gifts
 are capitalised at assessed values with corresponding credit taken to
 Capital Reserve.
 
 4.2 All costs relating to acquisition of fixed assets till the time of
 bringing the assets to working condition for intending use are
 capitalised.
 
 5.  Intangible Assets
 
 Costs incurred on intangible assets, resulting in future economic
 benefits are capitalized as intangible assets.
 
 6.  Exploration, Development and Production Costs
 
 6.1 Acquisition Cost
 
 Acquisition cost of an oil and gas property in exploration/development
 stage is taken to acquisition cost under the respective category. Such
 costs are capitalized by transferring to Producing Property when it is
 ready to commence commercial production. In case of abandonment, such
 costs are expensed. Acquisition cost of a producing oil and gas
 property is capitalized as Producing Property.
 
 6.2 Survey Cost
 
 Cost of Survey and prospecting activities conducted in the search of
 oil and gas are expensed in the year in which these are incurred.
 
 6.3 Exploratory/ Development Wells in Progress
 
 6.3.1 All acquisition costs, exploration costs involved in drilling and
 equipping exploratory and appraisal wells, cost of drilling exploratory
 type stratigraphic test wells are initially capitalised as Exploratory
 Wells in Progress till the time these are either transferred to
 Producing Properties on completion as per policy no. 6 4.1 or expensed
 in the year when determined to be dry or of no further use, as the case
 may be.
 
 6.3.2 All wells under “Exploratory Wells in Progress” which are more
 than two years old from the date of completion of drilling are charged
 to Profit and Loss Account except those wells where it could be
 reasonably demonstrated that the well has proved reserves and the
 development of the field in which the wells are located has been
 planned.
 
 6.3.3 All costs relating to Development Wells are initially capitalized
 as Development Wells in Progress and transferred to Producing
 Properties on completion as per policy no. 6.4.
 
 6.4 Producing Properties
 
 6.4.1 Producing Properties are created in respect of an area/field
 having proved developed oil and gas reserves, when the well in the
 area/field is ready to commence commercial production.
 
 6.4.2 Cost of temporary occupation of land, successful exploratory
 wells, all development wells, depreciation on related equipment,
 facilities and estimated future abandonment costs are capitalised and
 reflected as Producing Properties.
 
 6.5 Depletion of Producing Properties
 
 Producing Properties are depleted using the “Unit of Production
 Method”. The rate of depletion is computed with reference to an area
 covered by individual lease/licence/asset/amortization base by
 considering the proved developed reserves and related capital costs
 incurred including estimated future abandonment costs. In case of
 acquisition, cost of Producing Properties is depleted by considering
 the proved reserves. These reserves are estimated annually by the
 Reserve Estimates Committee of the Company, which follows the
 International Reservoir Engineering Procedures.
 
 6.6 Production Costs
 
 Production costs include pre-well head and post well head expenses
 including depreciation and applicable operating costs of support
 equipment and facilities.
 
 6.7 Side tracking
 
 6.7.1 The cost of abandoned portion of side tracked exploratory wells
 is charged to Profit and Loss Account as dry wells.
 
 6.7.2 The cost of abandoned portion of side tracked development wells
 is considered as part of cost of development wells.
 
 6.7.3 The cost of sidetracking in respect of existing producing wells
 is capitalized if it increases the proved developed reserves otherwise,
 charged to Profit and Loss Account as workover expenditure.
 
 7.  Impairment
 
 Producing Properties, Development Wells in Progress (DWIP) and Fixed
 Assets (including Capital Works in Progress) of a “Cash Generating
 Unit” (CGU) are reviewed for impairment at each Balance Sheet date. In
 case, events and circumstances indicate any impairment recoverable
 amount of these assets is determined. An impairment loss is recognized,
 whenever the carrying amount of such assets exceeds the recoverable
 amount. The recoverable amount is its ''value in use'' or ''net selling
 price'' (if determinable) whichever is higher. In assessing value in
 use, the estimated future cash flows from the use of assets and from
 its disposal at the end of its useful life are discounted to their
 present value at appropriate rate.
 
 An impairment loss is reversed if there is change in the recoverable
 amount and such loss either no longer exists or has decreased.
 Impairment loss / reversal thereof is adjusted to the carrying value of
 the respective assets, which in case of CGU, is allocated to its assets
 on a pro-rata basis. Subsequent to impairment depreciation is provided
 on the revised carrying value of the assets over the remaining useful
 life.
 
 8.  Abandonment Cost
 
 8.1 The full eventual estimated liability towards costs relating to
 dismantling, abandoning and restoring offshore well sites and allied
 facilities are recognized in respective assets when the well is
 complete / facilities are installed.
 
 8.2 The full eventual estimated liability towards costs relating to
 dismantling, abandoning and restoring onshore well sites are recognized
 when the well is complete. Cost relating to dismantling abandoning and
 restoring its allied facilities are accounted for in the year in which
 such costs are incurred as the salvage value is expected to take care
 of the abandonment costs. The abandonment cost on dry well is charged
 to Profit and Loss Account.
 
 Liability for abandonment cost is updated based on the technical
 assessment available at current costs with the Company.
 
 9.  Joint Ventures
 
 The Company has Joint Ventures in the nature of Production Sharing
 Contracts (PSC) with the Government of India and various bodies
 corporate for exploration, development and production activities.
 
 9.1 The income, expenditure, assets and liabilities of the Jointly
 Controlled Assets are merged on line by line basis according to the
 participating interest with the similar items in the Financial
 Statements of the Company and adjusted for depreciation, depletion,
 survey, dry wells, abandonment, impairment and sidetracking in
 accordance with the accounting policies of the Company.
 
 9.2 Consideration for the right to participate in operations
 recoverable from new Joint Venture Partners are :
 
 1.  Reduced from respective capitalized cost wherever applicable.
 
 2.  Reduced from current expenditure to the extent it relates to
 current year.
 
 3.  Balance is considered as miscellaneous receipts.
 
 9 .3 The hydrocarbon reserves in such areas are taken in proportion to
 the participating interest of the Company.
 
 10.  Investments
 
 Long-term investments are valued at cost. Provision is made for any
 diminution, other than temporary, in the value of such investments.
 
 Current Investments are valued at lower of cost and fair value.
 
 11.  Inventories
 
 11.1 Finished Goods (other than Sulphur) and stock in pipelines/tanks
 and carbon credits are valued at Cost or net realisable value whichever
 is lower. Cost of Finished Goods is determined on absorption costing
 method. Sulphur is valued at net realisable value. The value of
 inventories includes excise duty, royalty (wherever applicable) but
 excludes cess.
 
 11.2 Crude oil in unfinished condition in flow lines upto Group
 Gathering Stations/Platforms and Natural Gas in Pipelines are not
 valued.
 
 11.3 Inventory of stores and spare parts is valued at Weighted Average
 Cost or net realisable value whichever is lower. Provisions are made
 for obsolete and non moving inventories.
 
 11.4 Unserviceable items, when determined, are valued at estimated net
 realizable value.
 
 12.  Revenue Recognition
 
 12.1 Revenue from sale of products is recognized on transfer of custody
 to customers.
 
 12.2 Sale of crude oil and gas (net of levies) produced from
 Exploratory Wells in Progress is deducted from expenditure on such
 wells.
 
 12.3 Sales are inclusive of all statutory levies except Value Added Tax
 (VAT). Any retrospective revision in prices is accounted for i the year
 of such revision.
 
 12.4 Revenue in respect of the following is recognized when there is
 reasonable certainty regarding ultimate collection:
 
 a.  Short-lifted quantity of gas.
 
 b.  Gas pipeline transportation charges and statutory duties thereon.
 
 c.  Reimbursable subsidies and grants.
 
 d.  Interest on delayed realization from customers.
 
 e.  Liquidated damages from contractors/suppliers.
 
 13.  Depreciation and Amortisation
 
 13.1 Depreciation on fixed assets is provided for under the written
 down value method in accordance with the rates specified in Schedule
 XIV to the Companies Act, 1956.
 
 13.2 Depreciation on additions/deletions during the year is provided on
 pro rata basis with reference to the date of additions/deletions except
 items of Plant and Machinery used in wells with 100% rate of
 depreciation and low value items not exceeding Rs.5000/- which are
 fully depreciated at the time of addition.
 
 13.3 Depreciation on subsequent expenditure on fixed assets arising on
 account of capital improvement or other factors, is provided for
 prospectively.
 
 Depreciation on refurbished/revamped assets which are capitalized
 separately is provided for over the reassessed useful life at rates
 which are not less than the rates specified in Schedule XIV to the
 Companies Act, 1956.
 
 13.4 Depreciation on fixed assets (including support equipment and
 facilities) used for exploration, drilling activities and on related
 equipment and facilities is initially capitalised as part of
 exploration cost, development cost or producing properties and
 expensed/depleted as stated in policy 6 above.
 
 13.5 Leasehold land is amortized over the lease period except perpetual
 leases.
 
 13.6 Intangible assets are amortized over the useful life not exceeding
 five years from the date of capitalization.
 
 14.  Foreign Exchange Transactions
 
 Transactions in foreign currencies are accounted for at the exchange
 rate prevailing on the date of the transaction. Foreign currency
 monetary assets and liabilities at the year end are translated using
 mean exchange rate prevailing on the last day of the financial year The
 loss or gain thereon and also the exchange differences on settlement of
 the foreign currency transactions during the year are recognized as
 income or expense and adjusted to the profit and loss account except
 where such liabilities and /or transactions relate to fixed assets/
 projects and these were incurred/ entered into before 1.4 2004 in which
 case, these are adjusted to the cost of respective fixed assets.
 
 15.  Employee Benefits
 
 15.1 All short term employee benefits are recognized at their
 undiscounted amount in the accounting period in which they are
 incurred.
 
 15.2 Employee Benefit under defined contribution plans comprising
 provident fund etc. is recognized based on the undiscounted obligations
 of the company to contribute to the plan. The same is paid to a fund
 administered through a separate trust.
 
 15.3 Employee benefits under defined benefit plans comprising of
 gratuity, leave encashment, compensated absences, post retirement
 medical benefits and other terminal benefits are recognized based on
 the present value of defined benefit obligation, which is computed on
 the basis of actuarial valuation using the Projected Unit Credit
 Method. Actuarial Liability in excess of respective plan assets is
 recognized during the year. Actuarial gains and losses in respect of
 post employment and other long-term benefits are recognized during the
 year.
 
 15.4 Liability for gratuity as per actuarial valuation is funded with a
 separate trust.
 
 16.  Voluntary Retirement Scheme
 
 Expenditure on Voluntary Retirement Scheme (VRS) is charged to Profit
 and Loss Account when incurred.
 
 17.  General Administrative Expenses
 
 General administrative expenses which are identifiable to Assets,
 Basins & Services are allocated to activities and the balance are
 charged to Profit and Loss Account. Such expenses at Headquarters are
 charged to Profit and Loss Account.
 
 18.  Insurance claims
 
 The company accounts for insurance claims as under :-
 
 18.1 In case of total loss of asset by transferring, either the
 carrying cost of the relevant asset or insurance value (subject to
 deductibles), whichever is lower under the head “Claims
 Recoverable-Insurance” on intimation to Insurer. In case insurance
 claim is less than carrying cost the difference is charged to Profit
 and Loss Account.
 
 18.2 In case of partial or other losses, expenditure incurred/payments
 made to put such assets back into use, to meet third party or other
 liabilities (less policy deductibles) if any, are accounted for as
 “Claims Recoverable-Insurance”. Insurance Policy deductibles are
 expensed in the year the corresponding expenditure is incurred.
 
 18.3 As and when claims are finally received from insurer, the
 difference, if any, between Claims Recoverable-Insurance and claims
 received is adjusted to Profit and Loss Account.
 
 19.  Research Expenditure
 
 Revenue expenses on Research are charged to Profit and Loss Account,
 when incurred.
 
 20.  Taxes on Income
 
 Provision for current tax is made as per the provisions of the Income
 Tax Act, 1961. Deferred Tax Liability / Asset resulting from ''timing
 difference'' between book and taxable profit is accounted for
 considering the tax rate and laws that have been enacted or
 substantively enacted as on the Balance Sheet date. Deferred Tax Asset
 is recognized and carried forward only to the extent that there is
 virtual certainty that the asset will be realized in future.
 
 21.  Borrowing Costs
 
 Borrowing Cost specifically identified to the acquisition or
 construction of qualifying assets is capitalized as part of such
 assets. A qualifying asset is one that necessarily takes substantial
 period of time to get ready for intended use. All other borrowing costs
 are charged to Profit and Loss Account.
 
 22.  Rig Days Costs
 
 Rig movement costs are booked to the next location planned for
 drilling. Abnormal Rig days'' costs are considered as unallocable and
 charged to Profit and Loss Account.
 
 23.  Deferred Revenue Expenditure
 
 Dry docking charges of Rigs/ Multipurpose Supply Vessels (MSVs), Geo
 Technical Vessels (GTVs), Well Stimulation Vessels, Offshore Supply
 Vessels (OSVs) Rig/equipment mobilization expenses and other related
 expenditure are considered as deferred expenditure and amortized over
 the period of use not exceeding five years.
 
 24.  Provisions, Contingent Liabilities and Contingent Assets
 
 Provisions involving substantial degree of estimation in measurement
 are recognized when there is a present obligation as a result of past
 events and it is probable that there will be an outflow of resources.
 Contingent Assets are neither recognized nor disclosed in the financial
 statements. Contingent liabilities are disclosed by way of notes to
 accounts.