CBI wants Oil Min to appoint expert for Reliance case

The CBI may ask Oil Ministry to appoint an expert to assist it in understanding transactions surrounding Reliance Industries' crown jewel KG-D6 fields, where the company has shown a phenomenal increase in cost of producing gas.

The CBI wants to understand the arguments offered by Mukesh Ambani's firm when it raised the cost of developing Dhirubhai 1 and 3 gas fields in the KG-D6 block from USD 2.39 billion proposed in 2004 to USD 5.196 billion in Phase-1 and another USD 3.3 billion in Phase-II.

Also read: KG-D6 gas allocation case: Oil min files affidavit in HC

Exploration and production of oil and gas from deep sea being complex issues, the agency wants to use the expertise of a domain expert to understand if all the expenses proposed by Reliance and approved by the Directorate General of Hydrocarbons (DGH) were justified.

Sources in the agency said that the CBI had approached an expert for making a detailed analysis who sought a fee of over Rs 20 lakh following which it decided to write to the Petroleum Ministry.

"We will be writing to the Petroleum Ministry for hiring the same expert for us as the agency cannot make such a huge payment," a senior CBI official said.

A Preliminary Enquiry into the case was registered in November 2009 on request of Petroleum Ministry following several objections raised by the anti-corruption watch dog -- CVC -- on the KG-D6 fields deal.

The Central Vigilance Commission had forwarded a complaint in which it was alleged that there was a phenomenal increase in capital expenditure from USD 2.4 billion to about USD 8.8 billion in the project.

Besides, the CBI may also seek help to understand why DGH allowed Reliance to retain to entire KG-D6 block in contravention of the policy that stipulates relinquishing 25% of the area every year.

Reliance Industries is the operator of block KG-DWN-98/3 or KG-D6 in the Krishna Godavari (KG) Basin off the Andhra Pradesh coast. It holds 90% stake in the block while Canada's Niko Resources has the remaining 10%.

In a draft audit report on KG-D6, the Comptroller and Auditor General (CAG) said the Directorate General of Hydrocarbons (DGH) allowed Reliance to hike capital expenditure for developing Dhirubhai-1 and 3, the largest of 18 gas finds in the block, by 117%.

"The increase in cost from (USD 2.39 billion in the) Initial Development Plan to (USD 5.196 billion) in the Addendum to the Initial Development Plan is likely to have a significant impact on the government of India's financial take.

"However, at this stage, based on the information provided, we are unable to comment on the reasonableness, or otherwise, of the increase in cost, both overall and in respect of individual line items," the CAG said in a draft report sent to the Oil Ministry for comments.

An operator like Reliance is allowed to recover all capital cost on developing a field from revenues earned from the sale of oil or gas before profits are split between the stakeholders, including the government.

Reliance had, however, said, "As a responsible operator, it has fully complied with the requirements in the Production Sharing Contract (PSC) at all times in conducting petroleum operations, and refutes any suggestion to the contrary.

"The KG-D6 project... has been globally acclaimed for its cost effective, speedy, flawless execution and smooth commissioning," Reliance had said in a statement.