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Rediff.com  » Business » Did not award KG-D6 block to RIL: Govt

Did not award KG-D6 block to RIL: Govt

Last updated on: November 01, 2012 17:05 IST

ParliamentRejecting allegations of sweetheart deal in award of KG-D6 block, the government has said Reliance Industries won the coveted area in an open international auction and the allocation was not made on nomination basis.

RIL had got the block in an intensely fought auction by submitting better commercial and technical bids than other bidders including ONGC-GAIL and Cairn Energy.

The government had in 1999 bid out KG-D6 and 23 other blocks through an international open tender under the New Exploration Licensing Policy that was formulated after four years of intense public consultations and using the best practices from the world over, a Petroleum Ministry official said.

RIL offered better commercial and technical terms than public sector ONGC-GAIL combine and Cairn Energy to win the KG-D6 block and signed Production Sharing Contract in April 2000 on terms that were similar of the other block winners that included Gazprom of Russia, ONGC and Cairn, the official added.

On Wednesday, India Against Corruption had alleged that the United Progressive Alliance and the previous National Democratic Alliance governments had favoured RIL by giving KG-D6 gas exploration contract and concessions at a huge cost to the exchequer.

Separately, a source close to RIL said both the PSC as well as the terms of auction were always widely publicised and have been in public domain since 1999.

"It is surprising that a lawyer like Prashant Bhushan should pretend such ignorance about either of these and wilfully misrepresent both."

On the charge that KG-D6 cost going up from $2.47 billion to $8.8 billion was on account of gold-plating, he said cost escalation occurred in tandem with similar well documented escalations in projects across the world.

The source said RIL has already informed the government that it has spent only about $5.7 billion so far and balance $3 billion out of $8.8 billion will not be required to be spent due to unforeseen geological complexities.

On gas price revision, he said the PSC demands that the contractor, who wins the block through a process of open auction, sell the gas produced also through a similar process of auction so as to get the best available arms-length price.

RIL since June this year has been representing to the government for a clarity on the price from April 1, 2014 when the five year term of current price of $4.2 per million British thermal unit expires.

In accordance with the terms of the PSC, it is seeking post 2014, a price equivalent to that India had agreed to pay Qatar about a decade ago for import of gas in LNG form.

Defending the price, the source said if producers under the same PSC (such as ONGC and Cairn) get import parity price for crude oil, which is equally scarce commodity and comes from the same wells as gas, why should gas be discriminated against.

The source dismissed suggestions of RIL having received any favours during 5-year stint of Murli Deora as Petroleum Minister.

"On the contrary, all of RIL's present day problems are because of him. It was Deora who got CAG to audit KG-D6 spending.

"It was Deora who clipped the marketing freedom and imposed arbitrary price curbs. It was Deora who got the government involved in fixing sales and allocations," he said.

Denying allegations of hoarding gas, the source said he wondered about the geological expertise of those making the allegations.

"If anyone has any doubts over the geology and state of production from the Block, the PSC allows for the appointment of international experts to assess the situation. RIL has already expressed its willingness to assist in any such exercise," he said.

On the issue of audit, the source clarified that at no stage RIL has contested the Government's right to conduct an audit by any agency (including the CAG) appointed by the Government to perform an audit as per Section 1.9 of the Accounting Procedure of the PSC.

In the past, RIL had allowed this audit in spite of the government having already exercised its rights and the audit having become time barred.

RIL's only objection is that comments on the technical performance of the operator must only be made by international experts having knowledge and experience of deep water operations, the source said.

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