Thursday, September 8, 2011

CAG indicts RIL, Oil Ministry for violations on KG D-6 contract!RIL notified KGD6 discoveries without details, Air India has accumulated debt of Rs 38,000 crore!Yet Anothre Drama just after ANNA CIVIL SOCIETY Relaunched Anti Reservation Movement with

CAG indicts RIL, Oil Ministry for violations on KG D-6 contract!RIL notified KGD6 discoveries without details, Air India has accumulated debt of Rs 38,000 crore!Yet Anothre Drama just after ANNA CIVIL SOCIETY Relaunched Anti Reservation Movement with Brand Equity Anti Corruption campaign Invoking Aggressive Brahaminical Nationality Blind to ABORT OBC Head count and Expediate Economic ethnic Cleansing,ADwani, the RSS Patriarch decalres Yatra against CORRUPTION quite Remeniscent of RAM RATH YATRA as KAMANDAL VS MANDAL!

Planning Commission wants India to set up $10 bn wealth fund! For Whose BENEFIT? Montek Would Not ANSWER! But the PRO US Democracy Movement to Finish AMBEDKARITES, Caste Hindu Polarisation, Second Generation of Reforms Launched and INDISCRIMINATE Anti People Legislation and REPRESSION Cruelest, MIND Control By FDI Fed Media and LPG Mafia Rule aligned with Corporate IMPERIALISM, DEREGULATED FDI Tell the story very well!

Indian Holocaust My Father`s Life and Time - SEVEN HUNDRED TWENTY THREE


Palash Biswas

http://indianholocaustmyfatherslifeandtime.blogspot.com/


http://basantipurtimes.blogspot.com
http://mulnivasinayak.com/newbooks.php

Fresh trouble seems to be brewing for the UPA government, as the Comptroller and Auditor General (CAG) tabled two more high-profile audit reports that could bring attention back to political corruption and misdeeds at the highest levels. The audit reports on Air India and oil exploration contracts, including the one for Reliance's KG Basin were tabled in Parliament. The Manmohan Singh government, currently under siege on the issue of corruption, came in for another strong indictment from the Comptroller and Auditor General of India (CAG) which charged the Petroleum and Natural Gas Ministry and the Directorate General of Hydrocarbons (DGH) of shelling out "undue benefits" to Mukesh-Ambani owned Reliance Industries Limited (RIL) for its blocks in the KG basin.Hindu Reports!

You may remember that I had been writing about the Resources of Public sector ONGC, targeted to be DIVESTED, Resources MISUSED to Explore Oil in KG Basin and the Richest Oil field being Gifted away to Private Sector!CAG report says, RIL notified KGD6 discoveries without details, Air India has accumulated debt of Rs 38,000 crore!

Planning Commission wants India to set up $10 bn wealth fund! For Whose BENEFIT? Montek Would Not ANSWER! But the PRO US Democracy Movement to Finish AMBEDKARITES, Caste Hindu Polarisation, Second Generation of Reforms Launched and INDISCRIMINATE Anti People Legislation and REPRESSION Cruelest, MIND Control By FDI Fed Media and LPG Mafia Rule aligned with Corporate IMPERIALISM, DEREGULATED FDI Tell the story very well!

The Planning Commission wants India to set up a sovereign wealth fund with an initial corpus of $10 billion, mainly to invest in energy and mining assets abroad.

"Sovereign Wealth Fund is something that the Finance Ministry is looking at. We have suggested to start with USD 10 billion," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here on the sidelines of a Ficci event.

Sovereign Wealth Fund is a government-owned corpus where money is pooled in from state resources to invest in overseas assets.

India has been mulling to set up its own fund in order to acquire strategic overseas assets in mining and energy segments to meet its future needs.

Countries like China and Singapore have already set up their sovereign wealth funds. Even China has acquired significant asset in foreign land through investment from its USD 400 billion fund in the recent past.

Referring to GDP growth in the current fiscal, Ahluwalia said that growth in the second half of the year would be crucial to attain 8 per cent economic expansion in the current financial year.

"Growth could be around 8 per cent (this fiscal). But, in the first quarter, it is below that. So to achieve 8 per cent, the growth has to accelerate in the second half of the year," he said.

He also said that he is not focusing on short-term issues rather looking at improving growth numbers in the future.

Ahluwalia also said that RBI has to decide whether it wants to give a pause to the monetary tightening policy.

"I generally agree with the Finance Minister. Personally what the Finance Minister has said is an indication of what the government thinks. But, it's a (RBI) Governor's call," Ahluwalia said.

The central bank has raised key policy rates 11 times in last one-year-and-a-half years to rein in rising inflation. However, Finance Minister Pranab Mukherjee recently said that the central bank should give a pause to such liquidity squeeze in the wake up a global economic turmoil.

About the fiscal deficit target, he said it is possible to stick to 4.6 per cent fiscal deficit target if the government keeps expenditure under control.

"I have noted and welcomed what the Finance Minister has said (regarding fiscal deficit) and we are hopeful that they will be able to stick to the fiscal deficit," he said.

As a huge amount of expenditure is approved in supplements, the government has the leverage to control this, he added. 

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6 SEP, 2011, 11.04PM IST, PTI

Government receives information about 7,700 cases of black money: Finance Ministry

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NEW DELHI: The government on Tuesday said it has collected specific information from treaty countries on 7,704 cases where payments were received from non-residents in various countries over the past two years and was investigating the cases.


"In the last 24 months Income Tax Department have collected 7,704 discrete items of information from treaty countries containing details of payments received by Indian citizens in various countries besides informations of LGT Bank accounts," the Finance Ministry said in its document on the measures taken to tackle black money.


This information, the Ministry added, is in various stages of processing and investigation.


The Ministry further said that based on the prosecution by the Central Board of Direct Taxes (CBDT) of the LGT bank accounts holders, theEnforcement Directorate is also taking necessary action under Foreign Exchange Management Act.


Besides, the government has made more than 175 requests to treaty partners in case of specific taxpayers in the 2009-10 financial year, it said.


While mentioning cross-border transaction, the Ministry said that special attention on such deals have resulted in collection of taxes of Rs 22,697 crore in the last fiscal.


"The CBDT has also raised demand of Rs 11,218 crore in case of Vodafone involving a cross-border deal with a tax haven country out of which tax of Rs 2,500 crore has been collected in this month," it said.


On the Hassan Ali case, it said that Letters Rogatory have been sent out to five foreign jurisdictions and "part replies have been received from some of them and further supplementary Letters of Request are also being issued".


The Finance Ministry has also received about 3,300 suggestions from public on ways to deal with black money.

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RBI Deputy Governor Subir Gokarn said it has no plan to ban teaser loans but warned that any such product will attract 2 per cent additional provisioning.
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The Reserve Bank of India, which has lifted rates 11 times in 18 months, makes its mid-quarter review on September 16.
Have to address contentious issues to boost manufacturing: Government
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The govt said it will have to address contentious issues like land acquisition and power supply to give a boost to the manufacturing sector.
Cash transfers to poor a faulty move, says NGO
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'The Delhi government's scheme of cash transfer in lieu of ration subsidy is a total fraud.'
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RBI is hardening its stand on FDI deals to drive home the point that there should be no strings attached to such inbound flows
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Review of physical infrastructure like development of highways and roads is also on the cards along with social sector, they said.
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Ficci has suggested that the proposed land acquisition act should apply to the private companies only if they buy 500 acres of land or more.
Credit organisation for SHGs soon: Pranab Mukherjee
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A credit organisation and financial institution for giving credit and subsidy to self-help groups will be launched soon, Finance Minister said.

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http://economictimes.indiatimes.com/news/economy/finance/government-receives-information-about-7700-cases-of-black-money-finance-ministry/articleshow/9888280.cms


Amidst a raging controversy over the Comptroller and Auditor General's (CAG) draft report severely criticising the role of the Oil Ministry in approving Reliance Industries' KG-D6 field cost, the Ministry on Thursday called for restraint saying the top auditor has not finalised its report yet.

The cash-for-vote scam rocked both Houses of Parliament onday with BJP objecting to the arrest of two of its "whistleblower" former MPs and demanding suspension of Question Hour to discuss the issue.

BJP Parliamentary Party Chief L.K. Advani had given a notice for suspension of Question Hour in the Lok Sabha to discuss the new developments in the case.

A similar notice was given in the Rajya Sabha by BJP member Ravi Shankar Prasad.

When the Lok Sabha met for the day, Speaker Meira Kumar read out a statement on Literacy Day and its significance and then took up the Question Hour.

But, Mr. Advani stood up and raised his hand for permission to speak. When the Chair did not allow him, other BJP members, along with NDA ally JD(U), protested.

In the din, Mr. Advani said former MPs — Faggan Singh Kulaste and Mahavir Singh Bhagora — have been sent to jail though they were whistleblowers in the scam.

Members from the Treasury Benches were on their feet demanding that Question Hour be held. The Speaker also said that since Thursday was the last day of the session, the Question Hour should be held.

However, when the Opposition did not relent, she adjourned the House till noon.

When the Rajya Sabha met for the day, Mr. Prasad said he has given a notice for suspension of Question Hour. He was backed by other party colleagues.

As Chairman Hamid Ansari ruled that it was Question Hour and took up the first listed question, BJP members started raising slogans against the government. Soon, some Congress members rushed into the well demanding that Question Hour be taken up.

Mr. Ansari then adjourned the House till 12:30 pm.

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CAG report: RIL notified KGD6 discoveries without details

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http://economictimes.indiatimes.com/news/economy/indicators/CAG-Report-RIL-notified-KGD6-discoveries-without-details-Air-India-has-accumulated-debt-of-Rs-38000-crore/articleshow/9908984.cms
Realty News
Draft land acquisition bill diluted to make it industry-friendly
Govt has defended its new land bill as industry-friendly, refuting criticism that it would push up costs for state-run, pvt cos.
http://economictimes.indiatimes.com/news/economy/indicators/CAG-Report-RIL-notified-KGD6-discoveries-without-details-Air-India-has-accumulated-debt-of-Rs-38000-crore/articleshow/9908984.cms

Yet Anothre Drama just after ANNA CIVIL SOCIETY Relaunched Anti Reservation Movement with Brand Equity Anti Corruption campaign Invoking Aggressive Brahaminical Nationality Blind to ABORT OBC Head count and Expediate Economic ethnic Cleansing,ADwani, the RSS Patriarch decalres Yatra against CORRUPTION quite Remeniscent of RAM RATH YATRA as KAMANDAL VS MANDAL!


BJP leader L K Advani on Thursday made a surprise announcement of undertaking a yatra across the country against the menace of corruption, a move seen as an attempt by him to get a grip over the party.


"I have decided to take out a yatra against corruption. The name of the yatra, its timing, point of origin and other details will be worked out with the party. Its focus will be on good governance and clean politics," the 83-year-old leader told reporters.


The decision of the quintessential rathyatri is likely to queer the pitch for some of the Gen-Next leaders who have been eyeing the highest position in the BJP hierarchy.


Asked if this would settle the leadership issue within BJP and if he would be the party's prime ministerial candidate in the next general elections, he evaded a reply.


BJP President Nitin Gadkari had recently said the party will not declare its Prime Ministerial candidate in the next Lok Sabha elections and the decision would be taken after the polls.


"The party has not declared its Prime Ministerial candidate before all the elections. Our party president has a right to say so," Advani said in response to a question.


Advani, whose 1990 rathyatra for building a Ram temple at the disputed site in Ayodhya changed the BJP's electoral fortunes, said he would complete this yatra against corruption before the Winter Session begins in November this year.


He later told reporters that the idea of taking out a rathyatra first came to his mind after the last winter session of Parliament was washed out over the opposition demand for a joint parliamentary committee to probe the 2G spectrum scam.





In its report on RIL's KGD6 contract, the CAG stated that the company notified discoveries without details and declared entire contract area as discovery area. RIL was found guilty of non-relinquishment of area. CAG said that the Director General of Hydrocarbon should have stopped RIL from proceeding with phase 2.

The CAG report questioned the "reasonableness of costs incurred" in the 2007/08 procurement activity in the area and said there was enough ground to revisit the profit sharing mechanism. It also called for indepth review of 10 contracts, including 8 awarded to Aker Group, by Reliance for developing KG-D6 finds.

The report said that the Oil Ministry should have reviewed the determination of contract area. It highlighted that that RIL's development activities were not guided by initial development plan. CAG has asked the government to amend all future production sharing contracts.

The CAG report on Air India covers, among other things, the purchase of 111 aircraft for over Rs 40,000 crore in 2006. CAG termed Air India's acquisition of "large number" of aircraft as "risky" and called the airlines' merger "ill-timed".

CAG has made adverse observations on several aspects, ranging from the wisdom behind ordering so many aircraft by a financially weak body to the financing of the deal. The report said that Air India has accumulated debt of Rs 38,000 crore.

The Air India audit covers the period of 2002 to 2010, most of which falls under the UPA, when Praful Patel was the civil aviation minister. Raising questions about the very contract for the aircraft purchase. It has examined the merger of Air India and Indian Airlines as well.

In June, a draft CAG audit report on performance of private energy companies, including RIL and Cairn, had criticised them for mismanaging oil and gas blocks, leading to significant erosion of companies' valuations


"The CAG report is at the draft stage," the Ministry said in a press statement in New Delhi. "This Ministry is examining the draft report, it involves scrutiny of administrative/ policy issues and technical issues. The preparation of a detailed reply will take some time."

"It is only after taking into account the reply of government that the office of CAG will suitably amend the draft report and send the final report for placing it on the table of Parliament," it added.
The CAG in its draft report had alleged that the Oil Ministry and its technical arm Directorate General of Hydrocarbons favoured Reliance but did not say if by doubling of cost of developing eastern offshore KG-D6 field, the Mukesh Ambani firm had over-billed the government and thereby caused loss to the state exchequer.

It also pulled up the Ministry for going out of its way to grant nearly 1,700 sq km of additional area to Cairn India adjacent to its oil discovery in Rajasthan block.

"As the process of preparation of reply and its vetting by the office of CAG is yet to be completed, it would be premature for the Ministry to give any response on the observations made in the draft report at this stage," it said.

"It would be equally incorrect for the media commentators, political leaders and civil rights activists to jump to conclusions and thus short circuit the process," the statement added.

On receipt of the Ministry's reply, the office of CAG will examine the reply on merits and will hold an exit conference with it before making its final observations.
"The Ministry, therefore, appeals to all concerned to exercise restraint and allow the process to be completed," the statement said.

The Ministry said it was at its request in November 2007 that the CAG agreed to carry out special audit in respect of certain blocks/fields operated under pre-New Exploration Licensing Policy (NELP) and NELP regimes.

"The draft Performance Audit Report has been received in this Ministry on June 8, 2011," it added. "While the above process is underway, the leaked draft report is being reported and commented upon in sections of the media."
The CAG in its draft audit report on KG-D6 block said the Ministry and DGH also bent the rules to grant "huge benefits" to Reliance when it was allowed to retain the entire block, but said gains cannot be quantified.


Now Hindu Reports:

The CAG also was "highly critical" of government oversight, particularly on high value procurement decisions, and sought an 'in-depth review' of 10 contracts, including eight awarded to Aker Group by RIL on a single-bid basis. "We recommend that in case of the KG-DWN-98/3, the Ministry should review in depth the award of 10 specific contracts on the basis of a single financial bid. We are not even remotely suggesting that the operator should follow government procurement procedures, yet any commercially prudent private acquisition would also attempt to generate competition and thereby obtain the most competitive price. Such concern for a cost effective acquisition is not perceptible in the aforementioned process," it noted in the report placed in Parliament on the concluding day of the Monsoon session.

The CAG said the contractor (RIL) was allowed to enter the second and third exploration phases of the blocks without giving up 25 per cent of the contract area in each, by treating the entire area as a discovery area. Coming down heavily on DGH, the watchdog for oil and gas exploration, the CAG said it should have stopped RIL from proceeding on the next phase of production in the light of earlier violation of the contract. "We recommended that the Ministry of Petroleum and Natural Gas should review the determination of the entire contract area as a "discovery area" strictly in terms of the PSC provisions. Further it should delineate the stipulated 25 per cent relinquishment area at the time of the conclusion of the first and second exploratory phases, and then correctly delineate the "discovery area" strictly based on the PSC definition, lined to well or wells drilled in that part, without considering any subsequent discoveries (which would be invalid on account of non-compliance with PSC provisions).

The CAG said the Petroleum Ministry and DGH were ill-equipped to oversee the PSCs with private players and was of the view that DGH should have stopped RIL from proceeding with phase 2. This block consists of 7,645 sq km in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001. Interestingly, during this period the Petroleum and Natural Gas Ministry was headed by Murli Deora the DGH by V.K. Sibal who is already facing a CBI inquiry.

The CAG questioned the 'reasonableness of costs incurred' in the 2007/08 procurement activity in the area and said there was enough ground to revisit the profit sharing mechanism. Pointing the RIL KG basin case, the CAG report states that the Petroleum Ministry and RIL both ignored the 'production-sharing contract' allowing the company to hoard exploitation acreage. The CAG found that by April-May 2005, the DGH did a U-turn away from its own rules to favour RIL in this regard.

Two other fields — Barmer Oil fields in Rajasthan operated by Cairn India and the Panna-Mukta and Tapti (PMT) fields, where State-run Oil and Natural Gas Corporation (ONGC) is the majority-stake holder, have also been studied by CAG. Without quantifying losses, the report says the government suffered substantial royalty losses from the PMT fields. ONGC holds 40 per cent in the PMT field, while British Gas India and Reliance Industries hold 30 per cent each.
However, CAG did not specify if the capital expenditure for KG-D6 being raised from $2.4 billion proposed in 2004 to $8.8 billion in 2006 was unjustified or inflated. It said the approval of estimates (first $2.4 billion and then $8.8 billion in 2006) "does not constitute acceptance of the cost projects", which can be done only through an audit of the actual cost incurred.
http://www.thehindu.com/news/national/article2435491.ece?homepage=true

Praful Patel defends himself, says CAG report 'full of contradictions'

Dubbing the CAG report on Air India's aircraft acquisition as "full of contradictions", Civil Aviation Minister in UPA 1 government Praful Patel on Thusrday said the airline would have closed down if new planes were not added to its fleet.


"Whatever the government did in its wisdom was to make the airline commercially viable. We had to decide immediately as to whether new planes should be bought otherwise the airline would have closed down," Patel, who was at helm at the civil aviation ministry when it took the purchase decision, told reporters here.


"In 2004, Air India and Indian Airlines had 93 aircraft, most of which were 20 years old. There was no way the airline could have withstood the global competition with these planes," Patel, now the Heavy Industries Minister in UPA-II, added.


His comments came soon after the Comptroller and Auditor General (CAG) questioned the Civil Aviation Ministry's decision to acquire 111 planes for Air India through debt, calling it "a recipe for disaster".


Terming the move for acquiring a "large number" of planes as "risky", CAG in its report tabled in Parliament today, said the aircraft acquisition had "contributed predominantly" to the airline's massive debt liability of Rs 38,423 crore as on March 31 last year.


"Ministry examining CAG draft report"

SPECIAL CORRESPONDENT
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Reacting to the draft report of the Comptroller and Auditor General (CAG) on the audit performance of private operators, the Petroleum and Natural Gas Ministry on Monday said the Ministry was examining it and would give a detailed reply to all the observations.
In a statement issued here, the Ministry said the CAG had at its request in November 2007 agreed to carry out special audit in respect of certain blocks/fields operated under pre-New Exploration Licensing Policy (NELP) and NELP regimes.
"The draft performance audit report sent by the Office of the Principal Director of Audit, Economic and Service Ministries has been received in this Ministry on June 8," it said.
It said the Ministry would prepare a reply to the audit observations after obtaining details from the relevant agencies and send it to the Office of the Principal Director of Audit for further necessary action at their end.
Reliance statement
Meanwhile, Mukesh Ambani-owned Reliance Industries Limited (RIL) in a statement said Reliance Industries had not received a copy of the aforesaid report and hence was unable to comment on specific issues.
The RIL statement said that "as a responsible operator, it has fully complied with the requirements in the PSC [Production Sharing Contract] at all times in conducting petroleum operations, and refutes any suggestion to the contrary."
"Significant contributor"
"The KG D6 project is a significant contributor to the country's economy and has been globally acclaimed for its cost-effective, speedy, flawless execution and smooth commissioning," it added.
Keywords: private operators audit, Reliance Industries, KG D6 project
http://www.thehindu.com/news/national/article2101956.ece

'PMO turned blind eye to repeated warnings on Reliance, Cairn'

SUJAY MEHDUDIA
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A former Revenue Secretary, E.A.S. Sarma, has accused the Prime Minister's Office (PMO) of turning a "blind eye" to his repeated warnings about the "alleged irregularities" committed in auditing capital costs and allowing price and other concessions to the Mukesh Ambani-owned Reliance Industries Limited (RIL) in the KG basin and Cairn India in Rajasthan.
In a letter addressed to Prime Minister Manmohan Singh on Tuesday, Mr. Sarma noted that he had written a series of letters to him on the apparent irregularities now unearthed by the Comptroller and Auditor-General in its draft report on production sharing contracts.
"As usual with the PMO, not a single one of these letters has been acknowledged for reasons best known to it. A copy of my letter dated August 8, 2009, addressed to CAG on Reliance gas from KG Basin in AP, was also sent to PMO without any response. I enclose here [with] copies of all these letters for your ready reference and also for the benefit of the public, as what I had then stated had serious public interest implications," the letter states.
In his latest letter to Dr. Singh, Mr. Sarma says his efforts to secure information from the Cabinet Secretariat and the Petroleum and Natural Gas Ministry have been stalled time and again. "I had been trying to secure information on the cost details of KG Basin gas by filing applications under the RTI Act before both the Cabinet Secretariat and the Ministry of Petroleum and Natural Gas, but I have been driven from pillar to post by both these agencies. I was forced to file an appeal under that Act before the CIC who, incidentally, directed the Cabinet Secretariat on April 4, 2011 to provide me the required information. However, neither the Cabinet Secretariat nor the Petroleum Ministry has complied with the CIC's order till date."
Referring to the CAG draft report carried by The Hindu, Mr. Sarma states that the manner in which the PMO, the Petroleum Ministry and the other agencies have kept silent on the irregularities pointed out by him and the manner in which the Cabinet Secretariat has stonewalled his RTI efforts "give me the uneasy feeling that the various government agencies including the PMO are apparently trying to hide the facts from the people of this country to benefit the oil companies," adding, "I hope it is not true."
The Visakhapatnam-based senior ex-bureaucrat, who runs a civil society forum, "Forum for Better Visakha," further notes that at a time when the government is engulfed in a multitude of scams and its actions have come under the scrutiny of the judiciary, the issues raised in the case of both RIL and Cairn India assume a great deal of public importance.
Mr. Sarma says the latest report of the CAG needs to be considered against the overall background in which the government has done away with transparency, competitive bidding procedures and public accountability. "The independence of the regulators in different sectors has been largely compromised, as was evident in the case of appointment of CVC. The government can no longer try to convince the people that its hands are clean. I am circulating this letter along with all its enclosures for a public debate on the broader issue of corruption and the specific cases of improprieties I have referred to in this letter," he concludes.
Keywords: Reliance Industries, Petroleum Ministry, CAG report, KG basin operations

RIL got 'huge, undue benefit' at taxpayers' expense

SUJAY MEHDUDIA
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In a blow to Mukesh Ambani and Manmohan Singh — whose government stands accused of providing "huge" and "undue benefit" to Reliance Industries Ltd. — the Comptroller and Auditor General has indicted the Petroleum and Natural Gas Ministry for allowing "irregularities and bending rules" to "oblige" RIL in the Krishna Godavari basin gas fields, leading to a massive and as yet "unquantifiable" loss to the national exchequer.
Though his name does not figure directly in the CAG report, Murli Deora was the minister during whose tenure these irregularities occurred. Mr. Deora ran the PNG ministry from January 2006 till January 2011, when he was moved to Corporate Affairs.
In its 193-page Draft Report on production sharing contracts (PSCs) in the oil and gas field — a copy of which is with The Hindu — the CAG exposes the "close nexus" between RIL and the "bureaucrats" working in the Petroleum Ministry as well as its Directorate General of Hydrocarbons (DGH). This allowed Reliance to retain its entire offshore acreage, rather than surrendering those areas where it had not found oil or gas so that the government could invite fresh bids from other companies. Also, RIL was uncritically allowed to hike the capital expenditure for developing Dhirubhai-1 and 3, the largest of 18 gas finds in the KG-DWN-98/3, popularly known as the KG-D6 block, by a whopping 117 per cent though this meant a revenue loss for the exchequer.
This unvalidated cost inflation allows RIL to get away with paying less royalty to the government, the CAG notes, pointing to a basic flaw in the nature of PSCs which offers private explorers little incentive to keep capital expenditure down.
"The increase in cost from $2.39 billion in the Initial Development Plan to $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 stated in its report that has been sent to the Petroleum Ministry for comments.
In an annexure, the CAG questions various items of expenditure including one for a vessel MOB-DEMOB where costs were increased more than four times from $91 million to $366 million but where the details of that spend were not provided to it by RIL. Other expenses added up to less but suggested a quest for featherbedding – such as buying expensive diesel for offshore operations from an RIL family company rather than from a cheaper PSU supplier.
RIL's "initial" capital expenditure plan was for $2.4 billion, which was increased to $5.2 billion for Phase-I with another $3.3 billion for Phase-II. The total amount comes to approximately Rs. 45,000 crore. Total gas output today, however, is much less than what the company had indicated on the basis of its capex.
Reacting to the CAG draft report, a RIL spokesman said: "Reliance Industries has not received a copy of the aforesaid report and hence is unable to comment on specific issues. The company strongly affirms that as a responsible Operator, it has fully complied with the requirements in the PSC at all times in conducting petroleum operations, and refutes any suggestion to the contrary."
Keywords: Reliance Industries Ltd, Krishna Godavari gas fields, Petroleum Ministry, KG-D6 block
http://www.thehindu.com/news/national/article2101942.ece

With CAG storm brewing for RIL, Jaipal meets Manmohan

SUJAY MEHDUDIA
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With the spectre of another 2G-like scam haunting the Manmohan Singh government, Petroleum and Natural Gas Minister Jaipal Reddy met the Prime Minister on Tuesday and is understood to have discussed the implications of the draft report of the Comptroller and Auditor General (CAG) on the irregularities it has unearthed in the Krishna-Godavari basin gas operations of Reliance Industries Ltd.
The CAG has come down heavily on the working of the Petroleum Ministry as well as the Directorate General of Hydrocarbons (DGH) and their "dubious role'' in giving "undue benefit" to Mukesh Ambani's RIL.
Coming out of the meeting, Mr. Reddy refused to comment but sources said the Petroleum Minister had requested a meeting with the Prime Minister on Monday and was granted the same for Tuesday morning.
Mr. Reddy's meeting with Dr. Singh assumes political significance as the CAG has pointed to a massive but as yet "unquantifiable'' loss to the national exchequer due to the "bending of rules'' to oblige RIL. The company has claimed a capital expenditure (capex) of Rs. 45,000 crore for two phases of the KG-D6 block, a higher figure than it had initially suggested. The CAG noted that the government's financial take will be adversely impacted by increases in capex but, unlike in the case of the 2G scam, it has declined to estimate the losses involved.
On Tuesday, the Bharatiya Janata Party cited the draft CAG findings on KG gas as further evidence of the UPA government's "corruption" but stopped short of asking for a criminal investigation or indeed the head of Murli Deora, who was Oil Minister at the time this "undue benefit" was granted to RIL. Mr. Deora was moved out of the Ministry in January and is currently Corporate Affairs Minister.
Apart from the CAG draft report, both Dr. Singh and Mr. Reddy are understood to have discussed the issue of a hike in the prices of diesel, LPG and kerosene to offset the massive losses being faced by the oil marketing companies. Mr. Reddy is understood to have urged an early decision.
Oil Ministry officials say they are looking into various aspects of the CAG report and would need at least 5 to 6 weeks to submit their reply. Interestingly, the CAG has asked for the Ministry's comments in two weeks. "If the time frame being talked about by the Ministry is correct, the report might not be tabled during the monsoon session of Parliament next month,'' a senior official said.
The role of the then Director General of Hydrocarbons (DGH), V.K. Sibal — criticised by the CAG for his functioning on the KG basin management committee — is already being probed by the CBI. On Tuesday, officials said Mr. Sibal was back in the Ministry in an attempt to explain his position on the KG-D6 approvals. The CAG had charged the DGH with favouring RIL by allowing it to double the KG-D6 gasfield's capital costs.
Keywords: Reliance, KG-D6 basin, Jaipal Reddy, Manmohan Singh, CAG report
http://www.thehindu.com/news/national/article2103829.ece

Petroleum Ministry showed undue favour to Cairn India: CAG report

SUJAY MEHDUDIA
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The Comptroller and Auditor General of India (CAG) has "charged" the Petroleum and Natural Gas Ministry with showing "undue favour" to Cairn India Limited (CIL) and of using a "backdoor method" in allowing the company to conduct exploration activities, including granting it over 856 sq. km. of additional area for oil discovery in the Rajasthan block.
Accusing the Ministry of violating the Production Sharing Contract (PSC) terms, the CAG said: "The grant of additional area of 1,708.20 sq. km. beyond the contract area by the government was not in line with the provisions of the PSC, adversely affecting the sacrosanct nature of the contract area and its phase relinquishment," it said in the draft report sent to the Petroleum and Natural Gas Ministry for comments.
The report is likely to be finalised soon and placed before Parliament during the monsoon session.
As per the PSC, the total contract area of the RJ-ON-90/1 block in Rajasthan, operated by CIL, was 11,108 sq. km. The Ministry had agreed to the company's request for an additional 852.2 sq. km. in 2004 and 856 sq. km in 2005.
"In our view, the contract area under the PSC is sacrosanct. The only scope for an extension of the contract area is in terms of Article 10.1 [Unit Development], which provides that if a reservoir is situated partly within the contract area and partly in an area where no PSC has been granted, the government will favourably consider extending the contract area to include the entire area of the reservoir, if so requested by the contractor. It can by no means be argued that already discovered reservoirs extend over the entire extended area of 852.20 sq. km. While there is some scope for considering reallocation of the area of 852.20 sq. km [stated to have been relinquished from the original area], the extension of 856 sq. km. is in no way covered by the terms of the PSC and amounts to a grant of "undue favour" to the operator [CIL]," the report states.
The report said the PSC provided for extension of the exploration by up to 36 months, subject to the approval of the Government of India, and also for an appraisal period of up to 30 months. In the case of CIL, the Ministry, when extending, in 2002, the stipulated exploration period of seven years by 36 months, said that the PSC's provision for extending the exploration period by a maximum of 30 months for appraisal work on discovery would not be applicable. However, it "failed" to have the PSC suitably amended. The Ministry granted successive extension without considering the already stipulated condition.
The CAG said CIL made fresh discoveries during the appraisal and development phases in areas already delineated for development. "This represented a 'backdoor method' for [allowing] further exploration activities, when the exploration period had come to an end. The development area was, evidently, irregularly delineated and included excess area beyond that properly associated with the declared commercial discoveries and the associated development plans."
Keywords: Cairn India, Petroleum Ministry
http://www.thehindu.com/business/companies/article2101664.ece

Government to act against RIL for not adhering to gas plan

SUJAY MEHDUDIA
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With the Directorate-General of Hydrocarbons (DGH) already probing the sudden decline in gas output from the KG-D6 fields operated by Reliance Industries Limited (RIL), the Petroleum and Natural Gas Ministry gets ready to take tough action against the Mukesh Ambani-owned company for not adhering to the Field Development Plan (FDP).
Thanks to this decline, gas allocation to a host of customers, including non-priority sectors, has had to be curtailed by around 20 million metric standard cubic meters per day (mmscmd). KG gas is now being supplied only to the power, fertilizer, LPG and city gas sectors. Though this has affected RIL's immediate sales revenue, analysts say the company does not lose since gas prices — which are set by the government and are due for revision only in 2014 — are much lower than what RIL would like to see.
A three-member team lead by Gautam Sinha, head of production, DGH, is assessing and reviewing the well-wise production and reservoir performance of the KG-D6 fields. The Management Committee comprising Petroleum Ministry and RIL officials have held three rounds of talks on the continued decline in gas production without any concrete result. What has particularly irked the Ministry, senior officials told The Hindu, is RIL's refusal to drill more wells under the agreed pact.
Under contractual terms, RIL had to drill 22 wells by the end of April this year. However, it has drilled only 18 and did not complete the required number on the plea that as gas output was declining, there was no need to drill further. "We are seriously concerned about RIL's refusal to drill four more wells under the contractual terms. We are not going to sit back and watch the situation. We will take strong action against them if they fail to fulfil what they had promised," said a senior Ministry official.
Ministry officials are also intrigued by the fact that RIL managed to strike a sweet deal, selling a 30 per cent stake in all its exploration blocks to BP for $7.2 billion even as it claims that the amount of gas in the overall structure is less than what it initially believed. "If RIL finds it is able to increase production when the price of gas is revised after 2014, people may ask whether BP, which invested billions, might have been privy to this eventual 're-discovery'," an official said.
In 2006, RIL had won a government award to invest $8.836 billion in Dhirubhai-1 and 3 (D1 and D3 fields) in its Eastern offshore KG-D6 Block after assuring production of 61.88 mmscmd of gas from 22 wells by April 2011 and 80 mmscmd from 31 wells by 2012. But a completely different scenario has emerged on the ground, with the D6 fields witnessing a drastic fall in gas output. Today, RIL is producing only about 42 mmscmd from the 18 wells drilled so far on D1 and D3 fields in that block. Another 8 mmscmd is being produced from an MA oilfield in the same block, taking the total output to around 50 mmscmd as against the 69.88 mmscmd committed by the company.
RIL says the output dipped after touching 61.5 mmscmd in March last year due to falling pressure in its wells and that drilling more wells will not solve the problem as it will only end up tapping the same resource.
In 2007, allegations of gold-platting — or inflating capital costs — were levelled against RIL when it claimed that the investment required for developing the D1 and D3 gasfields was $8.8 billion and not $2.47 billion initially proposed in 2004. Because of its revenue implications for the exchequer, the matter is under the investigation of the Comptroller and Auditor-General of India.
Keywords: Reliance Industries Limited, KG-D6 fields, Field Development Plan

http://www.thehindu.com/news/national/article2096865.ece

Amar wasn't alone, cast the net wide: CPI(M)

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'During trust vote, a number of MPs were induced'
The Communist Party of India (Marxist) has reiterated its demand that the net be cast wide in the cash-for-vote scam probe so that the bribing of more members of Parliament is exposed.
Reacting to the arrest of Amar Singh and two former BJP MPs, the Polit Bureau on Wednesday said the action followed the Supreme Court directive to the Delhi Police to expedite investigation.
It said that during the July 2008 trust vote, a number of MPs were induced to defect to the government side and at least 19 Opposition MPs violated the whip.
"Many of them were subsequently disqualified. It is well known that they were bribed or intimidated to do so. The case of the three MPs who produced cash on the floor of the House [Lok Sabha] is only one small part of the overall operation undertaken by the ruling party and its allies to bribe and suborn MPs. Obviously, Mr. Amar Singh was not acting alone," said the CPI(M) statement.
Earlier, CPI parliamentary party leader Gurudas Dasgupta said since some people benefited by the cash-for-vote, the Congress and the Prime Minister, as leader of the government, should clarify at whose behest Mr. Amar Singh had acted.
"He could not have acted on his own," Mr. Dasgupta said adding a person, who had been given top category security by the government, was now sent to jail.
"Right man is in the right place and speaks to how the government was protecting criminals."
Keywords: Cash-for-vote scam, Amar Singh arrest, CPI(M)
http://www.thehindu.com/news/national/article2433434.ece

Arrested MPs are "whistleblowers", says Advani

PTI
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PTIA TV grab of BJP leader L.K. Advani making a statement on the cash-for-vote scam in Lok Sabha on Thursday.

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Advani, Sushma skip Speaker's tea partyGo for the mastermindsAmar Singh held, sent to jail in cash-for-vote caseAmar wasn't alone, cast the net wide: CPI(M)Congress 'believes in the due process of law'Parliament adjourned over cash-for-vote scam

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The BJP on Thursday went on the offensive on the cash-for-vote scam with L.K. Advani hailing the former BJP MPs, who were jailed, as "whistleblowers" and declaring that if they are guilty then he too should be sent behind bars.

Amid repeated disruptions from the Congress members in the Lok Sabha, the BJP Parliamentary Party chief made a strong defence of the actions of Faggan Singh Kulaste and Mahavir Bhagora during the July 22, 2008 Confidence Vote.

"Whatever was done was done as per Constitutional norms. If anything was wrong I would have stopped them," said Mr. Advani, who is also Working Chairman of NDA.

Raising the issue on the last day of the tumultuous Monsoon session of Parliament, Mr. Advani insisted that it was evident during the Confidence Vote that the government was "trying to purchase votes."

"They were whistleblowers who honestly reported the matter in the House. They presented the money. That time I was the Leader of the Opposition and I know the facts...

"I believe that these two members have done a great service to democracy by bringing in Parliament the Rs one crore given to them," he said during Zero Hour.

He lamented that those who voted for the government "through dishonesty" by taking money are sitting here comfortably, "but my two friends who honestly served the country are in jail."

There were disruptions from the Congress members from the time Mr. Advani rose to speak who at one point threatened that he would be forced to raise the issue outside if he was not allowed to have his say in the House.

As the disruptions continued, Speaker Meira Kumar adjourned the House till 12.55, the second adjournment of the day on the cash-for-vote issue.

NDA protests in Parliament complex

NDA leaders protested in Parliament premises against the arrest of two former BJP MPs who had acted as "whistleblowers" in the cash-for-vote scam and demanded the resignation of Prime Minister Manmohan Singh, alleging that he was heading a corrupt government.

Senior BJP leaders, including Mr. Advani, Sushma Swaraj, Arun Jaitley, Jaswant Singh, Rajnath Singh and others, along with ally JD(U) led by Sharad Yadav, held a protest demonstration at the Mahatma Gandhi statue in Parliament House complex against the arrest of the two former BJP MPs— Faggan Singh Kulaste and Mahavir Bhagore.

The leaders shouted slogans like, "Prime Minister should resign", "The government which is incompetent has to be removed" and "This government of scams will not continue".

Keywords: cash-for-vote scam, sting operation, UPA trust vote, monsoon session


BUSINESS » COMPANIES

NEW DELHI, September 8, 2011

CAG indicts RIL, Oil Ministry and DGH for violations in KG basin

SUJAY MEHDUDIA
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The HinduThe Comptroller and Auditor-General of India (CAG) has charged the Petroleum and Natural Gas Ministry and the Directorate-General of Hydrocarbons (DGH) of shelling out 'undue benefits' to Mukesh Ambani owned Reliance Industries Ltd. (RIL) for its blocks in KG basin.
Criticises Centre's oversight on high value procurement decisions
The Comptroller and Auditor-General of India (CAG) has charged the Petroleum and Natural Gas Ministry and the Directorate-General of Hydrocarbons (DGH) of shelling out 'undue benefits' to Mukesh Ambani owned Reliance Industries Ltd. (RIL) for its blocks in KG basin.
The CAG was 'highly critical' of government oversight, particularly on high value procurement decisions, and sought an 'in-depth review' of the ten contracts, including eight awarded to the Aker Group by RIL on a single-bid basis. "We recommend that in the case of the KG-DWN-98/3, the Ministry should review in depth the award of ten specific contracts on the basis of a single financial bid. We are not even remotely suggesting that the operator should follow government procurement procedures, yet any commercially prudent private acquisition would also attempt to generate competition and thereby obtain the most competitive price. Such concern for a cost effective acquisition is not perceptible in the aforementioned process,'' it noted in the report placed in Parliament on the concluding day of the Monsoon session on Thursday.
The CAG said the contractor (RIL) was allowed to enter the second and third exploration phases of the blocks without giving up 25 per cent of the contract area in each, by treating the entire area as a discovery area. Coming down heavily on the DGH, the watchdog for oil and gas exploration, the CAG said it should have stopped the RIL from proceeding on the next phase of production in the light of earlier violation of the contract. "We recommended that the Ministry of Petroleum and Natural Gas should review the determination of the entire contract area as 'discovery area' strictly in terms of the Production Sharing Contract (PSC) provisions. Further it should delineate the stipulated 25 per cent relinquishment area at the time of the conclusion of the first and second exploratory phases, and then correctly delineate the 'discovery area' strictly based on the PSC definition, lined to well or wells drilled in that part, without considering any subsequent discoveries [which would be invalid on account of non-compliance with the PSC provisions].
DGH favoured RIL
The CAG said the Petroleum Ministry and the DGH were ill-equipped to oversee the PSCs with private players and was of the view that the DGH should have stopped RIL from proceeding with Phase-II. This block consists of 7,645 sq. km. in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001. Interestingly, during this period the Petroleum Ministry was headed by Murli Deora, the DGH by V. K. Sibal, who is already facing a CBI inquiry. The CAG questioned the 'reasonableness of costs incurred' in the 2007-08 procurement activity in the area and said there was enough ground to revisit the profit sharing mechanism. Pointing the RIL KG basin case, the CAG report states that the Petroleum Ministry and RIL ignored the PSC, allowing the company to hoard exploitation acreage. The CAG found that during April-May 2005, the DGH did a U-turn away from its own rules to favour RIL in this regard.
Two other fields — Barmer Oil fields in Rajasthan operated by Cairn India and the Panna-Mukta and Tapti (PMT) fields, where the Oil and Natural Gas Corporation (ONGC) is the majority-stake holder — have also been studied by the CAG. Without quantifying losses, the report says the government suffered substantial royalty losses from the PMT fields. ONGC holds 40 per cent in the PMT fields, while BG India and RIL hold 30 per cent each.
However, the CAG did not specify if the capital expenditure for the KG-D6 being raised from $2.4 billion proposed in 2004 to $8.8 billion in 2006 was unjustified or inflated. It said the approval of estimates does not constitute acceptance of the cost projects.
Keywords: CAG report, Reliance Industries, Oil Ministry, Directorate-General of Hydrocarbons

http://www.thehindu.com/business/companies/article2436539.ece


Auditor General rebukes Reliance contention

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The institution has been auditing ONGC and Oil India for several decades
The contention of Reliance Industries Limited (RIL) questioning the competence and scope of the Comptroller and Auditor General (CAG) to carry out an audit of its KG basin facilities was strongly rebuked by the CAG which said the audit was to verify if government revenues were protected.
Time and again, RIL had had challenged the scope, extent and coverage of CAG audit at various points, including as late as the exit conference the top auditor held in July to conclude the audit.
"We do not agree with the operator's (RIL) views regarding our audit scope, extent and coverage," CAG said in its final report tabled in Parliament on Thursday.
The company had stated that CAG's scope was limited to verification of charges and credits (authenticity of expenditure) and inspection of books and records and did not permit an audit of the operational, commercial and technical decisions. "One of our key audit objectives was to verify whether the revenue interests of the government (including royalty and share of profit petroleum) were properly protected. Verification of charges and credits relating to the contractor's activities were not merely limited to an arithmetical totalling.
"Such an exercise would extend to verifying whether the costs being depicted in the production sharing contract (PSC) accounts by the contractor, which would critically affect the determination of profit petroleum and government's share therein, are correctly determined," it said. The CAG said all its enquiries and findings emerge from and were limited to the PSC. "We do not profess to go into a procedure or policy-related aspects leading to the conclusion of the PSC.
The challenge of the operator (RIL) with regard to the experience of CAG in conducting audit of oil and gas exploration and production is unwarranted. This institution has been conducting audit of ONGC as well as Oil India for several decades and the collective audit expertise is adequate to meet the challenges of scrutiny of hydrocarbon PSC, it added.
In its response to the issues raised by RIL, the Petroleum and Natural Gas Ministry in July, 2011, had agreed that the scope of audit conducted by the CAG was within the common audit parameters and indicated that financial or accounting audit also envisaged review of activities and resources contributing to financial events and the controls thereon.
Keywords: Reliance Industries, Auditor General, CAG report

http://www.thehindu.com/business/companies/article2436542.ece

Moneycontrol » News » Business » Business News

CAG report on RIL: Will it taint India's credibility?

Published on Thu, Sep 08, 2011 at 21:16 |  Source : CNBC-TV18
Updated at Thu, Sep 08, 2011 at 22:46  
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Reliance
BSE | NSE 08/09/11

he Comptroller and Auditor General's (CAG) final audit report on Reliance Industries (RIL) says Reliance Industries violated the production sharing pact, but the DGH and Petroleum Ministry are equally to blame being ill-equipped to oversee the production sharing contract.
In an interview to CNBC-TV18, Narendra Taneja, South Asia bureau chief of Upstream and SP Tulsian of sptulsian.com, discuss the report.
Also read: Peeved by CAG's report on RIL, experts say co future safe
Below is the edited transcript of the interview. Also watch the accompanying videos.
Q: Former ONGC chairman and managing director RS Sharma says, " This report is going to be damaging for the oil and gas sector in India. This report is disconnected with the ground realities of E&P business, not just in India, but globally. This report will taint India's credibility in the E&P space." Would you go as far as that?
Taneja: After this, who is going to come and invest in this country? Nobody wants to invest in this country. The Government of India then forces Indian companies to bid. That's how Reliance and ONGC and Indian companies have accumulated large portfolios or E&P blocks in the country.
My question is, 'Who actually has got expertise?' My own assessment is that no authority, no corporate, no entity in India has expertise to ask the kind of questions that are being asked. Even Reliance has developed this particular block with the help of international contractors, 90% of the job has been done by foreign companies. So, who has the expertise?
It's very important for CAG or for that matter any other Government of India body to actually hire some expertise. Then they can ask questions. Otherwise, they are damaging the national interest. And they shouldn't be doing that.
Q: What does this really mean for stocks like Reliance, Cairn from a market point of view?
Tulsian: This is going to be a big relief for Reliance Industries. I don't think that market was really expecting such a big U-turn. Earlier there was a lot of fear. In the last month, whole market was struggling with these fears and apprehensions that if any kind of action is initiated by CAG, then obviously it will be having the consequential inquiry maybe by the CBI. In my view, this is going to be a big relief.
If you see the final CAG reports, there are unwarranted or casual statements like they have said that it is common for operators to overstate the cost. Secondly, they have said that DGH should not have allowed the RIL to go for the second phase of KG-D6. So, I think these are all too general statements. I don't think the market will give any credence to them. The stock is likely to see a big relief from the stock market point of view.
Q: CAG has recommended the government to revise the formula in the production sharing contract, the business of front loading and the capex which has been debated by private operators like Reliance. Where do you stand on that issue?
Taneja: I will take you back to the time when the government of India lunched the new exploration licensing policy (NELP). At that time spirit was we are ready to do anything for you but come and invest in exploration and production activities in India. Reliance and others moved into India with that premise.
Today we want BP, Mobil and Chevron to come to India. Are we working to create the right kind of environment in this country? Otherwise what will happen – if you keep creating this kind of environment, companies like Reliance and Essar will also quit India.
They will go wherever they find more environment friendly for E&P companies. Do you want to foresee Reliance and other companies to leave this country? My only question is we should go to countries like Norway, US, Australia, and understand how the deep water exploration is working.
The best practices and best laws followed there we should try to bring them to India. For that to happen, it is important that DGH becomes an autonomous body. DGH is just a part of the government of India, part of the ministry of Petroleum and Natural Gas. We have to start from A and here we are talking of Z already.
Q: Do you find any merit at all in the suggestions that the CAG has made with regards to tweaking the production sharing contract at least from a future point of view or Narendra  and RS Sharma do you also believe it is just going to get really hard to do E&P business in this country?
Tulsian: I agree with Narendra and RS Sharma. In the hindsight we may always feel that about six- seven years have been placed by private operators. Only then we have reached to a level where 100 mmscmd or more gas production can be expected. Here the need is more of the self sufficiency or increase in production.
Currently, our production is at 150 million standard cubic meters per day. If we are able to produce 250 million standard cubic meters per day then that will replace our crude and oil demand. To think of tweaking the production sharing contract (PSC) is a premature and ill-conceived move. Even if there are any losses we should first absorb those and have self sufficiency.
Tags: Reliance Industries, Comptroller and Auditor General, CAG, DGH, Petroleum Ministry, Narendra Taneja, SP Tulsian
http://www.moneycontrol.com/news/business/cag-reportril-will-it-taint-india39s-credibility_584298.html

KG-D6 Gas Scam

From Wikipedia, the free encyclopedia

In it's leaked[1] Draft Report (2010–2011), the Comptroller and Auditor General of India's (CAG) first ever audit of oil and gas companies operating in India, said that the Government of India unduly favoured private oil and natural gas explorers including the Mukesh Ambani-ledReliance Industries Ltd incurring a huge loss to the exchequer. The CAG report mentioned that the Ministry of Petroleum and Natural Gas(MOP&NG) and its regulatory arm - the Directorate General of Hydrocarbons (DGH) - allegedly favoured at least three private oil and natural gas explorers. The report alleges that the government allowed Ambani's Reliance Industries Ltd (RIL) to violate terms of its contract with the government for exploration in the Krishna-Godavari basin (KG-D6). The CAG report also stated that the Directorate General of Hydrocarbons had allowed RIL to violate norms.The violation of terms, in turn, helped Reliance Industries Ltd increase its capital expenditure plan to start production from the Krisha-Godavari basin. Allegedly, 70% of the draft Comptroller and Auditor General of India report is devoted to Reliance Industries Ltd alone.[2]

Prime Minister Manmohan Singh's government has been accused of providing "huge" and "undue benefit" to Reliance Industries Ltd — the Comptroller and Auditor General has indicted the Ministry of Petroleum and Natural Gas for allowing "irregularities and bending rules" to "oblige" RIL in the Krishna Godavari basin gas fields, leading to a massive and as yet "unquantifiable" loss to the national exchequer. In its 193-page Draft Report on production sharing contracts (PSCs) in the oil and gas field , the CAG laid bare the "close nexus" between RIL and the "bureaucrats" working in the Petroleum Ministry as well as its Directorate General of Hydrocarbons. This allowed RIL to retain its entire offshore acreage, rather than surrendering those areas where it had not found oil or gas so that the government could invite fresh bids from other companies.[3]

The CAG sent its Draft Report to the Ministry of Petroleum and Natural Gas (MOP&NG) on June 8, 2011. The CAG report also noted that former Directorate General of Hydrocarbons (DGH) permitted Reliance Industries Ltd (RIL) to inflate its development costs on extracting the gas in the D6 block to the KG basin (KG-D6) from USD $2.47 billion to a huge USD $ 8.84 billion. The CAG also cited a joint venture of RIL with British Gas(BG) and Oil and Natural Gas Corporation(ONGC) for hiking development costs in the Panna-Mukta and Tapti gas fields. It has been earlier been alleged that an Empowered Group of Ministers (EGoM) had allowed Reliance Industries Ltd to sell per unit of the gas at a price of INR Rs. 4.20 even as the government companies were selling the same for just INR Rs. 1.20.[4]

The alleged modus operandi was to submit a bid which shows a certain capital cost and during the operation of the contract, inflate the capital cost by a huge amount with the connivance of the Directorate General of Hydrocarbons (DGH) and the Ministry of Petroleum and Natural Gas (MOP&NG).[5] The Comptroller and Auditor General (CAG) had said that it faced obstacles from private oil and gas companies, some of which operate India's prestigious fields, as it probed accounts to unearth their irregularities. The independent government auditor said its work was "interrupted due to difficulties in obtaining access to the records of operators".[6]

Contents

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[edit]Alleged Nexus

In 2009 senior Income Tax officials in its report warned the Central Bureau of Investigation (CBI) of India, of a nexus between Reliance Industries Ltd and bureaucrats in the Ministry of Petroleum and Natural Gas (MOP&NG).The CBI was alerted in this report to the possibility that Reliance Industries Ltd had bought a house for (Vinod Kumar Sibal) V K Sibal, Head of the Directorate General of Hydrocarbons (DGH), the technical arm of the Ministry of Petroleum that supervises licenses and permissions for private operators. "As per a conversation, RIL has purchased a house for VK Sibal, Director General Hydrocarbons," the report stated. However, the CBI, for yet unknown reasons, did not follow up on any of the incriminating charges listed in the report. Mr Sibal's term was not extended when it expired in October, 2009; no inquiry was launched to examine his relationship with Reliance Industries Ltd. The Income Tax department's note on the house allegedly bought for Mr Sibal emerged from what's known as "the Niira Radia recordings".[7]

The Central Bureau of Investigation's (CBI) preliminary enquiry (PE) had alleged that in lieu of undue favours shown to Reliance Industries Ltd (RIL), Sibal availed of various services including accommodation for his two daughters for more than four months at RIL's guest house in Dalal House in Mumbai.[8]

In August 2009, the rival Anil Ambani group firm Reliance Natural Resources Ltd. (RNRL) launched an advertisement campaign wherein the company accused the Ministry of Petroleum of helping rival Mukesh Ambani's Reliance Industries Ltd (RIL) earn super-normal profits. On the 6th of October, 2009, RNRL filed a petition in the Supreme Court of India accusing DGH head V K Sibal of colluding with RIL in approving the "gold-plated" costs. In response, on the 7th of October, 2009, the Directorate General of Hydrocarbons (DGH), through full-page advertisements, said that the capital expenditure at RIL's KG-D6 field had gone up from USD $ 2.47 billion to USD $ 8.8 billion due to a three-fold rise in plant capacity, doubling of output, 16 additional wells and a host of other facilities.[9]

Vinod Kumar Sibal is related to Kapil Sibal, Minister of Human Resource Development and Minister of Communications and Information Technology.[10]

After the CAG, the high-level Ashok Chawla Committee had criticised the system of Production Sharing Contracts (PSC) like the one Reliance Industries Ltd signed for the gas-rich KG-D6 block, saying that these contracts are designed to benefit private players at the Government's expense.[11] The report of the Chawla Committee, which included 14 senior bureaucrats and two industry representatives, was submitted to the Government in early June, 2011. The structure and functioning of the DGH, the ministry's technical arm and a deemed regulator for the sector, came in for particular scrutiny of the panel, which asked the government to shut what it called the revolving doorthat allowed oil industry executives to work at the DGH on deputation and go back to their firms.[12]

On the 1st of July, 2011, in the registration of a formal case of corruption against V K Sibal, former DGH, the CBI also mentioned a Houston-based company - GX Technology (GXT) and its Indian representative — Sujata Venkatraman, for showering favours on V K Sibal and his family members. It had been alleged that the entire cost incurred by Sonia Sibal, the former DGH's younger daughter, in completing a hotel management course from one of the prestigious institutes of Switzerland was borne by Sujata Venkatraman of GX Technology (GXT).[13]

[edit]Alleged Government Inaction

On 14 June 2011, Tapan Sen, senior Member of Parliament and Member of the Standing Committee on Petroleum said he had alerted Prime Minister Manmohan Singh and the Ministry of Petroleum way back in 2007 to energy companies overstating costs of developing gas fields in state-administered bids, so that they could fetch higher profits. Communication between MP Tapan Sen and the Prime Minister's Office(PMO) shows that Sen wrote to the Ministry of Petroleum and Singh on at least four occasions on these irregularities.[14]

The Government also allegedly ignored the queries and concerns of EAS Sarma, a former Energy Secretary."I have written to prime minister on this specific issue of (the pricing of natural gas from the fields licensed to RIL in the) KG Basin KG gas and the Cairn oil/gas fields several times, but not a single letter has been acknowledged"."What I read about the CAG's findings has corroborated what I had pointed out"."If true, the loss to the exchequer would be enormous. Oil and gas are the country's valuable natural resources. Unfortunately, the government has placed these resources in the hands of private agencies. By playing into their hands, the interests of the nation seem to have been compromised." Sarma said the government's silence and its refusal to reply to his RTI gives the impression that it is trying to hide facts from the people.[15]

Former Petroleum Minister, Murli Deora, under whose tenure the KG-D6 irregularities were committed, allegedly has proximity to RIL'sMukesh Ambani.[16]

[edit]Protests and Developments

On 17 June 2011,the Communist Party of India (Marxist) said the draft CAG report on the production-sharing contracts for the KG basin gas was only the "tip of the iceberg" and that it had already "exposed the nexus between the UPA government and Reliance Industries." The CPI(M) demanded immediate action against the former Director-General of Hydrocarbons (DGH) and other officials who allegedly colluded in the sordid affair, causing loss to the government and unduly benefiting Reliance Industries Ltd. The party also demanded an immediate amendment of the present pricing formula in the Production Sharing Contract (PSC) in consultation with the CAG.[17]

Murli Manohar Joshi, Chairman of the Parliament's Public Accounts Committee (PAC) asked the Indian Government. "Why did you allow this loot? Is the Government going to return the money to consumers who paid extra just because a private company had to make profit? Who were the Finance and Petroleum Ministers then? Under whose pressure did the eGoM clear a hike in gas prices? Under what pressure did the eGoM take this decision?"[18]

In its initial response, the Ministry of Petroleum had ruled out any loss to the exchequer on account of Reliance Industries, or RIL, raising the capital cost of developing India's largest gas field, and planned to tell the national auditor (CAG) that some of its observations were not practical and would repel much-needed private capital in the high-risk exploration business.[19]

On the 14th of June, 2011, Petroleum and Natural Gas Minister Jaipal Reddy met the Prime Minister and is understood to have discussed the implications of the draft report of the Comptroller and Auditor General (CAG) on the irregularities it has unearthed in the Krishna-Godavari basin gas operations of Reliance Industries Ltd.[20]

On the 20th of June, 2011, Petroleum and Natural Gas Minister Jaipal Reddy did not deny the government auditor's (CAG) observations on the Ministry of Petroleum favouring three private oil companies, including RIL, but questioned the political opposition's "premature" criticism of the Government on the basis of a draft report. Reddy also said media should not draw conclusions since the CAG report was yet to be finalized. He said the ministry will give an "appropriate response" to the CAG in eight weeks and accept with an "open mind" any critical comment if it was made in the government auditor's final report.[21]

As a response to the Draft Report of the CAG, in a letter to the Ministry of Petroleum in June 2011, Reliance Industries Ltd criticized the National Auditor, whose stern remarks about capital spending in the company's trophy D6 oil block had sent its shares tumbling, and it said the reported comments reflected "complete misunderstanding of legal and contractual issues" and had hurt its reputation.[22] The observations in the CAG Draft Report severely impacted RIL's shares. Until 23rd of June 2011, the stock had fallen 10.5% since the report was leaked in the week beginning 13th of June 2011 - it fell in seven out of eight trading sessions, making RIL the worst performer amongSensex stocks, Bloomberg data showed.[23]

On the 22nd of June, 2011, the Ministry of Petroleum (allegedly, on behalf of RIL and Cairn) wrote to the CAG saying the audit observations were never discussed with either Reliance or Cairn and they did not get an opportunity to respond to the strictures. The CAG on the same day replied back firmly saying its "audit mandate, scope and coverage" did not provide for seeking a response on its draft observations and that the Government can raise audit objections after it has finalised its report and it is tabled in Parliament.[24]

On the 24th of June, 2011, Reliance Industries Ltd (RIL) Chairperson Mukesh Ambani met Prime Minister Manmohan Singh amid accusations of his company increasing capital expenditure and violating terms of contracts with the Government of India. Ambani met the PM in the wake of the Draft Report from the Comptroller and Auditor General (CAG) that had alleged that RIL received favours from the Ministry of Petroleum and Directorate General of Hydrocarbons, the regulator for oil hunting companies. RIL had also obtained portions of the CAG Draft Report after it made a request to the Ministry of Petroleum.[25]

On the 1st of August 2011, the Parliament of India was informed by the Minister of State for Petroleum and Natural Gas that "the average gas production during April-June 2011 from the KG-D6 (KG-DWN-98/3) block is 48.60 million standard cubic meters per day (mmscmd) which is less than the approved Field Development Plan (FDP) rate of 70.39 mmscmd" [26]

On the 8th of September, 2011, the Indian national auditor - the Comptroller & Auditor General (CAG) tabled its report in the Indian Parliament. The report faulted the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), for allowing Reliance Industries Ltd (RIL) to retain the entire 7,645 sq km KG-DWN-98/3 (KG-D6) block in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001. As per the Production Sharing Contract (PSC), Reliance should have relinquished 25 per cent of the total area outside the discoveries in June, 2004, and 2005, but the entire block was declared as a discovery area and the company was allowed to retain it. [27]

In the same report, the CAG mentioned the following on the KG basin irregularities: [28]

1) Reliance Industries Ltd (RIL) undertook procurement activities late 2) RIL is guilty of non-relinquishment of area 3) RIL extended contracts violating Production Sharing Pact 4) RIL did not relinquish non-performing wells 5) Amend all future production sharing contracts: CAG 6) DGH ill equipped to oversee Production Sharing Contracts 7) RIL to CAG: Contract area had hydrocarbon potential 8) DGH should have stopped RIL from proceeding with phase 2 9) RIL violated production sharing contract in KG-D6

[edit]Investigations

In October, 2009, The Central Bureau of Investigation (CBI) had initiated a probe against Director-General of Hydrocarbons V K Sibal on allegations that he had received favours from Mukesh Ambani-owned Reliance Industries Limited (RIL) for approving a near four-fold hike — to $8.8 billion — in expenditure for gas field. Official sources in the CBI said a reference had been received from the Central Vigilance Commission(CVC) in this regard and the agency would look into it. The then CVC Secretary K.S. Ramasubban had on October 1, 2009, written to the then CBI Director Ashwani Kumar seeking discreet field verification on the allegations of RIL purchasing flats in Mumbai for Mr. Sibal's daughter and incurring expenses over purchase of consumer durables for her. However, for reasons yet unknown, no headway had been made in the case till June, 2011.[29]

Reliance Industries Ltd's alleged "gold plating" of capital costs in developing the KG-D6 field - as pointed out by the CAG in its draft report - also finds mention in one of the three preliminary enquiries (PE) filed by the Central Bureau of Investigation (CBI) against former Director General of Hydrocarbons (DGH) V K Sibal. "It is alleged that Sibal favoured RIL and approved a phenomenal increase in the capital expenditure from $2.4 billion to $8.8 billion for KG D6 field between September and December 2006 in lieu of personal favours/ services from RIL Group of Industries," said CBI's PE no 6(A)/2009 filed by its Anti-Corruption Unit. CBI officials said that they would be using the CAG report to correlate with their findings.The CBI's first request to the Ministry of Petroleum - whose officials are also implicated in the CBI enquiry - for a copy of the report was in September 2010. "A PE is registered against V K Sibal, unknown officials of the Petroleum Ministry and unknown others for gross misconduct committed by them," said the PE dated November 26, 2009.[30]

The CBI located 30 key files pertaining to extension/s of exploration period given by the Ministry of Petroleum and Natural Gas to the Reliance Industries Limited (RIL) and the Oil and Natural Gas Corporation Limited (ONGC). The files contained information on the processing and approval of extension/s, beyond the Production Sharing Contract (PSC), to RIL and ONGC during 2003-09. The files - including note sheets and all correspondence on the issue - were located in the Ministry's Exploration Division by its Vigilance section as per a written request by the investigation agency.[31]

In June, 2011, the CBI filed three separate Preliminary Enquiries (PE) based on the findings of the Draft CAG Report which had found a number of violations, some facilitated by the Government of India, in oil exploration contracts signed by the Government with Reliance Industries Limited (RIL), Cairn India and the Oil and Natural Gas Corporation (ONGC). Some of these violations between 2006 and 2008 may have resulted in "huge" losses to the exchequer, according to the CAG. Neither the CAG nor the CBI has quantified the amount. The CBI was waiting for the Ministry of Petroleum to submit its reply to the CAG before summoning senior officials like former secretaries of the Ministry and the former Director General of Hydrocarbons (DGH) for questioning. CBI sources did not rule out the possibility of summoning officials from Reliance, Cairn and ONGC for questioning.[32]

On the 23rd of June, 2011, the CBI announced that a First Information Report (FIR) will be filed against V K Sibal, the former chief of the Directorate General of Hydrocarbons (DGH) of the Ministry of Petroleum and Natural Gas, over allegations that he extended irregular favours to private and public sector explorers in lieu of personal benefits.[33]

On the 1st of July, 2011, the CBI registered a case against former chief of Directorate General of Hydrocarbons, V K Sibal and seven others for allegedly favouring private firms in carrying out seismic exploration of oil and gas along Indian coasts. Besides Sibal, the agency named the then directorate officials -- chief geologist D K Rawat, manager finance and accounts TSLN Reddy, advisor Geophysics S K Jain, HoD Accounts K A Murli, chief chemist Savinder Gupta and advisor contract Ms Anurit Sahi - in the First Information Report (FIR). [34] On the same day, the CBI raided the premises and offices of V K Sibal. The raids were carried out simultaneously across 15 places including Mr Sibal's premises in NOIDA, Delhi and Dehradun. [35]

On the 3rd of July, 2011, the CBI proposed that the Ministry of Petroleum and Natural Gas appoint an expert to assist the CBI in understanding transactions surrounding Reliance Industries Ltd's KG-D6 fields, where the company had shown a phenomenal increase in the cost of producing gas. The CBI wanted to understand the arguments offered by Mukesh Ambani's company 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. [36]

[edit]References

  1. ^ "Congress surprised at leak of CAG report on RIL". The Hindu. 15 June 2011. Retrieved 19 June 2011.
  2. ^ "Govt favoured RIL in K-G deal: CAG report". CNBC TV18. 13 June 2011. Retrieved 19 June 2011.
  3. ^ "Fresh scam rocks UPA Govt: Mukesh Ambani got "special favours"". The Asian Tribune. 21 June 2011. Retrieved 22 June 2011.
  4. ^ "KG basin contract: RIL under scanner again". Zee News. 18 June 2011. Retrieved 19 June 2011.
  5. ^ "The Reliance KG Gas Scam". NewsClick. 16 June 2011. Retrieved 19 June 2011.
  6. ^ "Oil Companies Tried To Duck Audit, Says CAG". The Link. 19 June 2011. Retrieved 20 June 2011.
  7. ^ "Nexus between Reliance, babus, says report". NDTV. 15 June 2011. Retrieved 19 June 2011.
  8. ^ "CAG indictment of RIL finds echo in CBI probe against oil regulator". The Indian Express. 19 June 2011. Retrieved 19 June 2011.
  9. ^ "DGH bellows innocence through newspaper ads". The Indian Express. 7 October 2009. Retrieved 19 June 2011.
  10. ^ "Why VK Sibal is in the news". Rediff Business. 16 October 2009. Retrieved 20 June 2011.
  11. ^ "Contracts like Reliance's KG-D6 are designed to benefit private players: Chawla Committee". The Economic Times. 21 June 2011. Retrieved 25 June 2011.
  12. ^ "Petroleum ministry opposes creation of independent regulator for oil & gas sector". The Economic Times. 29 June 2011. Retrieved 29 June 2011.
  13. ^ "CBI files FIR against former DGH VK Sibal". The Economic Times. 02 July 2011. Retrieved 03 July 2011.
  14. ^ "MP says he warned PM on gas scam". Hindustan Times. 15 June 2011. Retrieved a19 June 2011.
  15. ^ "Is PMO ignoring another scam after 2G, this time in energy?". Daily News & Analysis. 18 June 2011. Retrieved 19 June 2011.
  16. ^ "CBI raids former DG of Hydrocarbons Ex-govt officer in the dock". The Deccan Herald. 01 July 2011. Retrieved 07 July 2011.
  17. ^ "CAG report on KG basin contract vindicates our stand, says CPI(M)". The Hindu. 18 June 2011. Retrieved 19 June 2011.
  18. ^ "Gas scam puts Govt in dock". The Pioneer. 19 June 2011. Retrieved 19 June 2011.
  19. ^ "No loss to exchequer from RIL's KG-D6 : Oil Ministry". The Economic Times. 15 June 2011. Retrieved 19 June 2011.
  20. ^ "With CAG storm brewing for RIL, Jaipal meets Manmohan". The Hindu. 14 June 2011. Retrieved 19 June 2011.
  21. ^ "Reddy does not deny CAG points". The Times of India. 21 June 2011. Retrieved 21 June 2011.
  22. ^ "Reliance Industries hits out at CAG over KG-D6 capital spending remarks". The Economic Times. 24 June 2011. Retrieved 24 June 2011.
  23. ^ "Reliance Industries hits out at CAG over KG-D6 capital spending remarks". The Economic Times. 24 June 2011. Retrieved 24 June 2011.
  24. ^ "CAG refuses to hear Reliance on KG-D6 field audit". The Times of India. 26 June 2011. Retrieved 26 June 2011.
  25. ^ "Mukesh Ambani meets PM on CAG draft". The Times of India. 25 June 2011. Retrieved 25 June 2011.
  26. ^ "RIL's KG-D6 gas output much below target". The Hindustan Times. 02 August 2011. Retrieved 20 August 2011.
  27. ^ "CAG report indicts Reliance, calls for indepth review of 10 contracts". The Economic Times. 8th September 2011. Retrieved 8th September 2011.
  28. ^ "CAG reports indict govt on KG basin contracts, AI acquisitions". The Times of India. 8th September 2011. Retrieved 8th September 2011.
  29. ^ "CBI launches probe against V.K. Sibal". The Hindu. 9 October 2009. Retrieved 19 June 2011.
  30. ^ "CAG indictment of RIL finds echo in CBI probe against oil regulator". The Indian Express. 19 June 2011. Retrieved 19 June 2011.
  31. ^ "Gas scam: CBI locates key files". Hindustan Times. 19 June 2011. Retrieved 19 June 2011.
  32. ^ "Gas Majors in CAG Net". India Today. 27 June 2011. Retrieved 27 June 2011.
  33. ^ "CBI to file FIR against ex-DGH chief VK Sibal". The Hindustan Times. 24 June 2011. Retrieved 29 June 2011.
  34. ^ "CBI books ex-DGH VK Sibal on graft charges". The Times of India. 01 July 2011. Retrieved 01 July 2011.
  35. ^ "CBI raids former oil regulator VK Sibal's house, firms". NDTV. 01 July 2011. Retrieved 01 July 2011.
  36. ^ "CBI wants Oil Ministry to appoint expert to help in Reliance case". The Economic Times. 04 July 2011. Retrieved 04 July 2011.
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Reliance Industries

From Wikipedia, the free encyclopedia
Reliance Industries Limited
Type Public
BSE: 500325
NSE: RELIANCE
Traded as LSE: RIGD
IndustryConglomerate
Founded1966 As Reliance Commercial Corporation
Founder(s)Dhirubhai Ambani
HeadquartersMumbai, Maharashtra, India
Area servedWorldwide
Key peopleMukesh Ambani 
(Chairman & MD)
ProductsOil and Gas
Petroleum
Petrochemicals
Polyester
Textiles
Retail
Insurance
SEZ
Telecom
Revenueincrease US$ 58.55 billion (2011)[1]
Net income increase US$ 4.54 billion (2011)[1]
Total assets increase US$ 63.84 billion (2011)[1]
Total equity increase US$ 34.12 billion (2011)[1]
Employees23,365 (2010)[1]
Subsidiaries Reliance Life Sciences
Reliance Industrial Infrastructure Limited
Reliance Logistics
Reliance Clinical Research Services
Reliance Solar
Relicord
Infotel Broadband
WebsiteRIL.com

Reliance Industries Limited (RIL) (BSE: 500325, NSE: RELIANCE, LSE: RIGD) is the largest private sector conglomerate company headquartered at Mumbai, India. The company is largest by annual turnover of $58.5 billion and market capitalization of $76.9 billion for the fiscal year ending in March 2011 making it one of the largest India's private sector companies, being ranked at 264th position in the Fortune Global 500 (2009[2]) and at the 126th position in theForbes Global 2000 list (2010).[3]

Reliance was founded by the Indian industrialist Dhirubhai Ambani in 1966. Ambani has been a pioneer in introducing financial instruments like fully convertible debentures to the Indian stock markets. Ambani was one of the first entrepreneurs to draw retail investors to the stock markets. Critics allege that the rise of Reliance Industries to the top slot in terms of market capitalization is largely due to Dhirubhai's ability to manipulate the levers of a controlled economy to his advantage.

Though the company's petrochemicals, refining, and oil and gas-related operations form the core of its business, however, other segment of the company includes textile, retail business, telecommunications and special economic zone (SEZ) development. After severe differences between the founder's two sons, Mukesh Ambani and Anil Ambani, the group was divided between them in 2006. In September 2008, Reliance Industries was the only Indian firm featured in the Forbes's list of "world's 100 most respected companies".[4] In 2010, it stood at 13th position in the Platts Top 250 Global Energy Company Rankings.[5]

Contents

 [hide]

[edit]Stock

According to the company website "1 out of every 4 investors in India is a Reliance shareholder.". Reliance has more than 3 million shareholders, making it one of the world's most widely held stocks. Reliance Industries Ltd, subsequent to its split in January 2006 has continued to grow. Reliance companies have been among the best performing in the Indian stock market.

The alleged irregularities by RIL in the KG-D6 gas controversy, along with the observations in the CAG Draft Report severely impacted RIL's shares. Until 23rd of June 2011, the stock had fallen 10.5% since the report was leaked in the week beginning 13th of June 2011 - it fell in seven out of eight trading sessions, making RIL the worst performer among Sensex stocks, Bloombergdata showed.[6]

On the 1st of July, 2011, Reliance Industries Ltd. fell 4% after the Press Trust of India reported that a federal probe agency (CBI) had registered a case against V.K. Sibal, a former Director General of Hydrocarbons, for allegedly favoring "leading private players and foreign consultants involved in oil and gas explorations." Although the agency didn't name any private-sector companies, dealers said that Reliance dropped sharply because of concerns that the company could be one of those allegedly involved. [7]

On the 17th of August 2011, Reliance Industries Ltd. lost its status as India's most valuable firm. RIL , for long the favourite of Indian investors, was knocked off its four-year perch as the country's most valuable company, as fears over slowing gas production dragged its stock down almost 30% in 2011 and led to the first full day of trade with state owned Coal India on top. [8]

[edit]Products

Reliance Industries Limited has a wide range of products from petroleum products, petrochemicals, to garments (under the brand name of Vimal), Reliance Retail has entered into the fresh foods market as Reliance Fresh and launched a non-veg chain called Delight Reliance Retail and NOVA Chemicals have signed a letter of intent to make energy-efficient structures.

[edit]Businesses

[edit]Major subsidiaries and associates

  • Reliance Life Sciences is a research-driven, biotechnology-led, life sciences organization that participates in medical, plant and industrial biotechnology opportunities. Specifically, these relate to Biopharmaceuticals, Pharmaceuticals, Clinical Research Services, Regenerative Medicine, Molecular Medicine, Novel Therapeutics, Biofuels, Plant Biotechnology and Industrial Biotechnology.[9]
  • Reliance Industrial Infrastructure Limited (RIIL) is engaged in the business of setting up / operating Industrial Infrastructure that also involves leasing and providing services connected with computer software and data processing.[10]
  • Reliance Institute of Life Sciences (Rils), established by Dhirubhai Ambani Foundation, is an institution of higher education in various fields of life sciences and related technologies.[11]
  • Reliance Logistics (P) Limited is a single window solutions provider for transportation, distribution, warehousing, logistics, and supply chain needs, supported by in house state of art telematics and telemetry solutions.[12]
  • Reliance Clinical Research Services (RCRS), a contract research organization (CRO) and wholly owned subsidiary of Reliance Life Sciences, has been set up to provide clinical research services to pharmaceutical, biotechnology and medical device companies.[13]
  • Reliance Solar, The solar energy initiative of Reliance aims to bring solar energy systems and solutions primarily to remote and rural areas and bring about a transformation in the quality of life.[14]
  • Relicord is the first and one of the most dependable stem-cell banking services of South East Asia offered by Mukesh Ambani controlled by Reliance Industries.[15]
  • Infotel Broadband is a broadband service provider, it is wholly owned by RIL for INR4,800 crore (US$1.07 billion).[16]

[edit]Reliance retail

Reliance Retail is the retail business wing of the Reliance business. Many brands like Reliance Fresh, Reliance Footprint, Reliance Time Out, Reliance Digital, Reliance Wellness, Reliance Trendz, Reliance Autozone, Reliance Super, Reliance Mart, Reliance iStore, Reliance Home Kitchens, and Reliance Jewel come under the Reliance Retail brand

[edit]Environmental record

Unbalanced scales.svg
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Reliance Industry is the worlds largest polyester producer and as a result one of the largest producers of polyester waste in the world. In order to deal with this large amount of waste they had to create a way to recycle the waste. They operate the largest polyester recycling center that uses the polyester waste as a filling and stuffing. They use this process to develop a strong recycling process which won them a reward in the Team Excellence competition.[17]

Reliance Industries backed a conference on environmental awareness in New Delhi in 2006. The conference was run by the Asia Pacific Jurist Association in partnership with the Ministry of Environment & Forests, Govt. of India and the Maharashtra Pollution Control Board. The conference was to help bring about new ideas and articles on various aspects of environmental protection in the region. Maharashtra Pollution Control Board invited various industries complied with the pollution control norms to take active part in the conference and to support as a sponsor. The conference proved effective as a way to promote environmental concern in the area.[18]

[edit]KG-D6 Gas Controversy

In its leaked[19] Draft Report (2010-2011), the Comptroller and Auditor General of India's (CAG) first ever audit of oil and gas companies operating in India, said that the Government of India unduly favoured private oil and natural gas explorers including the Mukesh Ambani-ledReliance Industries Ltd incurring a huge loss to the exchequer. The CAG report mentioned that the Ministry of Petroleum and Natural Gas(MOP&NG) and its regulatory arm - the Directorate General of Hydrocarbons (DGH) - allegedly favoured at least three private oil and natural gas explorers. The report alleges that the government allowed Ambani's Reliance Industries Ltd (RIL) to violate terms of its contract with the government for exploration in the Krishna-Godavari basin (KG-D6). The CAG report also stated that the Directorate General of Hydrocarbons had allowed RIL to violate norms.The violation of terms, in turn, helped Reliance Industries Ltd increase its capital expenditure plan to start production from the Krisha-Godavari basin. Allegedly, 70% of the draft Comptroller and Auditor General of India report is devoted to Reliance Industries Ltd alone.[20]

Prime Minister Manmohan Singh's government has been accused of providing "huge" and "undue benefit" to Reliance Industries Ltd — the Comptroller and Auditor General has indicted the Ministry of Petroleum and Natural Gas for allowing "irregularities and bending rules" to "oblige" RIL in the Krishna Godavari basin gas fields, leading to a massive and as yet "unquantifiable" loss to the national exchequer. In its 193-page Draft Report on production sharing contracts (PSCs) in the oil and gas field , the CAG exposes the "close nexus" between RIL and the "bureaucrats" working in the Petroleum Ministry as well as its Directorate General of Hydrocarbons. This allowed RIL to retain its entire offshore acreage, rather than surrendering those areas where it had not found oil or gas so that the government could invite fresh bids from other companies.[21]

The CAG sent its Draft Report to the Ministry of Petroleum and Natural Gas (MOP&NG) on June 8, 2011. The CAG report also noted that former Directorate General of Hydrocarbons (DGH) permitted Reliance Industries Ltd (RIL) to inflate its development costs on extracting the gas in the D6 block to the KG basin (KG-D6) from USD $2.47 billion to a huge USD $ 8.84 billion. The CAG also cited a joint venture of RIL with British Gas(BG) and Oil and Natural Gas Corporation(ONGC) for hiking development costs in the Panna-Mukta and Tapti gas fields. It has been earlier been alleged that an Empowered Group of Ministers (EGoM) had allowed Reliance Industries Ltd to sell per unit of the gas at a price of INR Rs. 4.20 even as the government companies were selling the same for just INR Rs. 1.20.[22]

The alleged modus operandi was to submit a bid which shows a certain capital cost and during the operation of the contract, inflate the capital cost by a huge amount with the connivance of the Directorate General of Hydrocarbons (DGH) and the Ministry of Petroleum and Natural Gas (MOP&NG).[23]

On 24 June 2011, Reliance Industries Ltd (RIL) chairman Mukesh Ambani met Prime Minister Manmohan Singh amid accusations of his company increasing capital expenditure and violating terms of contracts with the Government of India. Ambani met the PM in the wake of the Draft Report from the Comptroller and Auditor General (CAG) that had alleged that RIL received favours from the Ministry of Petroleum and Directorate General of Hydrocarbons, the regulator for oil hunting companies. RIL had also obtained portions of the CAG Draft Report after it made a request to the Ministry of Petroleum.[24]

On 3 July 2011, the CBI proposed that the Ministry of Petroleum and Natural Gas appoint an expert to assist the CBI in understanding transactions surrounding Reliance Industries Ltd's KG-D6 fields, where the company had shown a phenomenal increase in the cost of producing gas. The CBI wanted to understand the arguments offered by Mukesh Ambani's company 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. [25]

On the 8th of September, 2011, the Indian national auditor - the Comptroller & Auditor General (CAG) tabled its report in the Indian Parliament. The report faulted the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), for allowing Reliance Industries Ltd (RIL) to retain the entire 7,645 sq km KG-DWN-98/3 (KG-D6) block in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001. As per the Production Sharing Contract (PSC), Reliance should have relinquished 25 per cent of the total area outside the discoveries in June, 2004, and 2005, but the entire block was declared as a discovery area and the company was allowed to retain it. [26]

In the same report, the CAG mentioned the following on the KG basin irregularities: [27]

1) Reliance Industries Ltd (RIL) undertook procurement activities late 2) RIL is guilty of non-relinquishment of area 3) RIL extended contracts violating Production Sharing Pact 4) RIL did not relinquish non-performing wells 5) Amend all future production sharing contracts: CAG 6) DGH ill equipped to oversee Production Sharing Contracts 7) RIL to CAG: Contract area had hydrocarbon potential 8) DGH should have stopped RIL from proceeding with phase 2 9) RIL violated production sharing contract in KG-D6

[edit]Awards and recognition

  • International Refiner of the Year in 2005 at the 23rd Annual Hart's World Refining and Fuels Conference [28]
  • According to survey conducted by Brand Finance and The Economic Times in 2010, Reliance is the second most valuable brand in India.[29]

[edit]Awards for managers

  • Mukesh D. Ambani received the United States of America-India Business Council (USIBC) leadership award for "Global Vision" 2007 in Washington in July 2007.
  • Mukesh D. Ambani was conferred the Asia Society Leadership Award by the Asia Society, Washington, USA, May 2004.
  • Mukesh D. Ambani ranked 13th in Asia's Power 25 list of The Most Powerful People in Business published by Fortune magazine, August 2004.
  • Mukesh D. Ambani is The Economic Times Business Leader of the Year
  • Mukesh Ambani was ranked as the 74th Most Trusted Individual in India in an early 2010 survey conducted by the Indian edition of Readers' Digest magazine.

[edit]See also

Factory 1b.svg Companies portal

[edit]External links

[edit]References

  1. ^ a b c d e "Financial Highlights". RIL Financial Highlights.
  2. ^ "Global 500 2009: Global 500 201-300 - FORTUNE on CNNMoney.com". Money.cnn.com. 2009-07-20. Retrieved 2010-07-16.
  3. ^ "The Global 2000". Forbes.com. 2010-03-01. Retrieved 2010-08-20.
  4. ^ PTI, Sep 6, 2008, 10.02pm IST (2008-09-06). "The Times of India". Timesofindia.indiatimes.com. Retrieved 2010-08-20.
  5. ^ Platts, Nov 2, 2010. "Platts Top 250 Global Energy Company Rankings". Retrieved 2010-11-03.
  6. ^ "Reliance Industries hits out at CAG over KG-D6 capital spending remarks". The Economic Times. 24 June 2011. Retrieved 24 June 2011.
  7. ^ "Reliance Drags India Shares Lower". The Wall Street Journal. 01 July 2011. Retrieved 01 July 2011.
  8. ^ "Reliance loses status as India's most valuable firm". Money Control. 18 August 2011. Retrieved 20 August 2011.
  9. ^ "About us, Reliance Life Sciences". Retrieved 2010-03-03.
  10. ^ "About us, Reliance Industrial Infrastructure". Retrieved 2010-03-03.
  11. ^ "About us, Reliance Institute of Life Sciences". Retrieved 2010-03-03.[dead link]
  12. ^ "About us, Reliance Logistics". Retrieved 2010-03-03.
  13. ^ "About us, Reliance Clinical Research Services". Retrieved 2010-03-03.[dead link]
  14. ^ "About us, Reliance Solar". Retrieved 2010-03-03.
  15. ^ "About us, Relicord". Retrieved 2010-03-03.
  16. ^ "Reliance Industries buys 95% stake in Infotel Broadband for Rs 4,800 cr". The Times Of India. Retrieved 11 Jun 2010.
  17. ^ Bhatt, Hari (2006). "Reliance Industries award". Findarticles.com. Retrieved 2010-08-20.[dead link]
  18. ^ "Conference on "Environment-Awareness-Enforcement" New Delhi."
  19. ^ "Congress surprised at leak of CAG report on RIL". The Hindu. 15 June 2011. Retrieved 19 June 2011.
  20. ^ "Govt favoured RIL in K-G deal: CAG report". CNBC TV18. 13 June 2011. Retrieved 19 June 2011.
  21. ^ "Fresh scam rocks UPA Govt: Mukesh Ambani got "special favours"". The Asian Tribune. 21 June 2011. Retrieved 22 June 2011.
  22. ^ "KG basin contract: RIL under scanner again". Zee News. 18 June 2011. Retrieved 19 June 2011.
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  29. ^ "India's top 10 brands". business.rediff.com. Retrieved 26 Oct 2010.
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Growth through Energy Security for India

Exploration and Production
Expression of Interest

India imports about two-thirds of its crude oil requirement. Exploration and production of oil and gas is critical for India's energy security and economic growth. Reliance's oil and gas exploration and production business is therefore inexorably linked with the national imperative. Exploration and production, the initial link in the energy and materials value chain, remains a major growth area and Reliance envisions evolving as a global energy major.

Energy markets have improved significantly over the past 12-15 months as a result of improved economic growth, higher demand for refined products and limited supplies of crude oil. In 2010, global oil demand grew by 3.4% (or 2.9 MMBD) to 87.9 MMBD, which is the highest growth in the last 30 years. Emerging Asia which comprises India and China, accounted for 40% of the oil demand increase. Global LNG markets also grew by 13% and are currently at 275 million tonnes per annum (MMTPA).

Crude prices increased 25% during the year wherein Brent oil prices averaged $86.7/bbl vis-a-vis $69.5/bbl in FY-10. In FY-11, the US benchmark Henry Hub gas prices averaged $4.13/MMBTU vis-a-vis $3.98/MMBTU in FY-10. Prices remained range-bound in the US due to excess drilling and lack of export infrastructure. However, Asian LNG prices remained linked to crude oil and spot prices in recent months touched $10-12/MMBTU.

It is expected that global energy consumption growth will average at around 1.7% per annum over the next two decades. Of this, non-OECD energy consumption is expected to be 68% higher by 2030, averaging 2.6% p.a. growth, and accounting for 93% of global energy growth. OECD energy consumption in 2030 is expected to be around 6% higher than today, with growth averaging at a measly 0.3% p.a. over the next two decades. 

The fuel mix is changing relatively slowly, due to long asset lifetime, but gas and non-fossil fuels are gaining share at the expense of coal and crude oil. The fastest growing fuels are renewables (including biofuels) which are expected to grow at 8.2% p.a. 2010-30; among fossil fuels, gas grows the fastest (2.1% p.a.). 

Non-OECD countries are likely to account for 80% of the global rise in gas consumption, with growth averaging at around 3% p.a. Demand growth is expected to be the fastest in non-OECD Asia (4.6% p.a.) and the Middle East (3.9% p.a.). It is expected that over the next two decades, China could consume about 43 BCF per day, which is comparable to that of the 47 BCF per day that EU currently consumes. The growth is expected to remain modest in OECD markets (1% p.a.), particularly in North America. 

Oil continues to suffer a long run decline in market share, while gas is steadily gaining. Natural gas is projected to be the fastest growing fossil fuel globally. Production is expected to grow in every region except Europe, with Asia accounting for the world's largest production and consumption increments. 

The IEA estimates that global upstream capital spending, which had fallen by 15% in 2009, has rebound in 2010 and is pegged at $ 470 billion. Global offshore capital expenditure is estimated at $ 150 billion and nearly $ 874 billion is expected to be spent over the next five years. A substantial portion of this investment will flow into deepwater. Deep-water capital expenditure is pegged at nearly $ 50 billion and deep-water production is set to double in the next five years. Currently, there are very few fields with water depths of more than 2,000 meters under development. Many of the recent discoveries have been in those water depths. The capital expenditure sanctioned in this water depth is likely to double by 2012. 

The role of unconventional oil is also expected to increase significantly and will touch 10% of world oil demand by 2035. 

India continues to remain amongst the fastest growing economies of the world with a projected growth of 8-9%. Consequently, India's energy needs are expected to treble by 2035 from 468 million tonnes of oil equivalent (MTOE) to nearly 1405 MTOE. India can fulfill its agenda for climate change as natural gas used to generate power has half the CO2 emissions of conventional coal power generation and near-zero sulphur emissions. 

Indian gas market 

In India, gas constitutes around 10% of the current energy basket compared to the global average of 24% and hence presents a vast potential for growth. The demand for natural gas in India is expected to grow at a CAGR of 10% over the next five years and could soon be a significant player in the global gas market.

RIL - BP partnership

On February 21, 2011, RIL and BP announced a strategic partnership between the two companies and signed the relationship framework and transactional agreements. The partnership across the full value chain comprises BP taking a 30% stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the producing KG-D6 block. The partnership will aim to combine BP's deep-water exploration & development capabilities with Reliance's project management & operations expertise. The two companies will also form a joint venture (50:50) for the sourcing and marketing of gas in India and bid together for incremental opportunities in the deep-water blocks in the east coast of India.

BP will pay RIL an aggregate consideration of $ 7.2 billion, and completion adjustments, for the interests to be acquired in the 23 production-sharing contracts. Future performance payments of upto $ 1.8 billion could be paid based on exploration success that results in development of commercial discoveries. RIL will continue to be the operator under the production-sharing contracts. Completion of the transactions is subject to regulatory and the Government of India approvals. 

RIL gas marketing 

KG-D6 was the single largest source of domestic gas in the country for FY-11 and accounted for almost 35% of the total gas consumption in India. The gas from KG-D6 catered to demand from 57 customers in critical sectors like fertilizer, power, steel, petrochemicals and refineries. The gas from KG-D6 accounted for about 44% of the total domestic gas production paving the way for increased energy independence for the country. 

RIL's E&P business: KG-D6 

KG-D6 gas fields completed 730 days of 100% uptime and zero-incident production. An average daily gas production from KG-D6 block for the year was 55.9 MMSCMD with a cumulative production of 1,257 BCF since inception, of which 720 BCF was produced in the current fiscal. An average oil production for the year from the block was 21,971 barrels per day with a cumulative production of 14 MMBL of oil and condensate since inception, of which 8 MMBL of oil and 1 MMBL of condensate was produced in the current fiscal. 

In the D1-D3 gas fields a total of 20 wells have been drilled, of which 18 are production wells. Of these, 2 wells have been drilled this fiscal. 

6 wells in the D26 field are under production. Of these, MA-2 which was earlier a gas injection well has been converted to a production well since April 2010. 

An integrated development plan for all gas discoveries in KG-D6 is being conceptualized. This will encompass existing wells and other discoveries within the block to maximize capital efficiency and to accelerate monetization.

Other domestic blocks 

The Company made six discoveries during the year which are as follows:

  • Well W1 in the KG-V-D3 block

  • Well AF1, AJ1, AT1, AN1 and AR1 in on-land CB-10 block

The Company has also submitted initial proposal for commerciality to DGH for review and discussion for the following blocks:

  • Discovery D33 in GS-01 block

  • Discoveries D39 and D41 in KG-V-D3 block

  • Discovery D36 in KG-D4 block

RIL has submitted an integrated appraisal programme for all discoveries in Part A of CB-10 block. Further, RIL has been continuing with the appraisal activities for the other discoveries in KG-D6, KG-V-D3 and CB-10 blocks.

Panna-Mukta and Tapti fields

The Panna-Mukta fields produced 9.3 MMBL of crude oil and 52.1 BCF of natural gas in FY-11 â€" a decline of 31% and 25% respectively over the previous year. The lower volumes are on account of complete shutdown due to failure of the single point mooring system (SPM) and parting of anchor chains 4 and 5 to the SPM from July 20, 2010 to October 25, 2010.

Tapti fields produced 1.2 MMBL of condensate and 95.2 BCF of natural gas in FY-11 â€" a decline of 22% and 13% respectively over the previous year. The decrease in production was due to a natural decline in the reserves.

Drilling of 6 wells in Panna-L is expected to commence soon and oil production is expected in the later part of FY-12. Its reserves are estimated at 7.0 MMBL. The anticipated production from all 6 wells is approximately 3,000 BOPD. 

CBM blocks

RIL holds 3 CBM blocks in Sohagpur (East), Sohagpur (West) and Sonhat. So far, RIL has completed the following work in the Sohagpur (East) and Sohagpur (West) blocks:

  • Over 40 core holes drilled, logged and tested for gas content, permeability and coal properties

  • 31 wells air drilled and tested for productivity

  • 75 hydraulic fracturing jobs done

  • 5 cavitation completion wells and 2 sets of in-seam horizontal wells

The process for acquiring land for well sites, market assessment & infrastructure for evacuation and transportation of gas has commenced.

International business

During the year, Reliance entered into one of the fastest growing opportunities emerging in the U.S. unconventional gas business through three upstream joint ventures. These joint ventures will materially increase Reliance's resources base and provide Reliance with an entirely new platform to grow its exploration and production business while simultaneously enhancing its ability to operate unconventional resource projects in the future. 

RIL - Chevron

RIL, through its subsidiary, Reliance Marcellus LLC, entered into a joint venture with Atlas Energy, Inc. (now owned by Chevron Corporation) under which Reliance acquired a 40% interest in Atlas' core Marcellus shale acreage position. The acquisition cost of participating interest in the JV consisting of $ 339 million of upfront payment and an additional payment of $ 1.36 billion under a carry arrangement for 75% of Atlas's capital costs over an anticipated seven and a half year development programme. Reliance becomes a partner in approximately 300,000 net acres of undeveloped leasehold in the core area of the Marcellus shale in southwestern Pennsylvania. The acreage will support the drilling of over 3,000 wells with a net resource potential of approximately 13.3 TCFe (5.3 TCFe net to Reliance).

While Atlas will serve as the development operator for the joint venture, Reliance is expected to begin acting as development operator in certain regions in coming years as part of the joint venture. Under the framework of the joint venture, Atlas will continue acquiring leasehold in the Marcellus shale region and Reliance will have the option to acquire 40% share in all new acreage. Reliance also obtains the right of first offer with respect to potential future sales by Atlas of around 280,000 additional Appalachian acres currently controlled by Atlas.

RIL - Pioneer

RIL, through its subsidiary, Reliance Eagleford Upstream LP, entered into a joint venture with Pioneer Natural Resources Company under which Reliance acquired a 45% interest in Pioneer's core Eagle Ford shale acreage position in two separate transactions. Pioneer and Newpek LLC, Pioneer's existing partner in Eagle Ford, simultaneously conveyed 45% of their respective interests in the Eagle Ford to Reliance. Newpek owned an approximate 16% nonoperated interest in Pioneer's core Eagle Ford shale acreage. Following the transaction, Pioneer, Reliance and Newpek own 46%, 45% and 9% of the joint venture interests, respectively.

The joint venture has an approximate net working interest of 91% in 289,000 gross acres implying 263,000 net acres. Reliance paid $ 1.315 billion for its implied share of 118,000 net acres. This upstream transaction consideration included combined upfront cash payments of $ 263 million and additional $ 1.052 billion capital costs under a carry arrangement for 75% of Pioneer's and Newpek's capital costs over an anticipated four years. The joint venture's leasehold, which is largely undeveloped, is located in the core area of the Eagle Ford shale in south Texas. Low operating costs, significant liquids content (70% of the acreage lies within the condensate window) and excellent access to services in the region combine to make the Eagle Ford one of the most economically attractive unconventional resources in North America. Pioneer believes the acreage will support the drilling of over 1,750 wells with a net resource potential to the joint venture of approximately 10 TCFe (4.5 TCFe net to RIL).

The joint venture plans to increase the current drilling programme to approximately 140 wells per year within three years. Also included in the transaction is current production of 28 MMCFe/d (11 MMCFe/d net to Reliance) from five currently active horizontal wells. While Pioneer will serve as the development operator for the upstream joint venture, Reliance is expected to begin acting as development operator in certain areas in coming years as part of the joint venture. Under the framework of the joint venture, Pioneer will continue acquiring leasehold in the Eagle Ford Shale and Reliance will have the option to acquire a 45% share in all newly acquired acres. 

Additionally, Reliance and Pioneer formed a midstream joint venture that will service the gathering needs of the upstream joint venture. Reliance's subsidiary, Reliance Eagleford Midstream LLC, paid $ 46 million to acquire a 49.9% membership interest in the joint venture. Pioneer and Reliance will have equal governing rights in the joint venture and Pioneer will serve as operator.

RIL - Carrizo

RIL, through its subsidiary, Reliance Marcellus II, LLC, entered into a joint venture with Carrizo Oil & Gas, Inc.

Under the transaction, Reliance acquired a 60% interest in Marcellus shale acreage in Central and Northeast Pennsylvania that was held in a 50:50 joint venture between Carrizo and ACP II Marcellus LLC, an affiliate of Avista Capital Partners. Pursuant to the transaction, Reliance acquired 100% of Avista's interest and 20% of Carrizo's interests in the joint venture. Reliance and Carrizo own 60% and 40% interests, respectively, in a newly formed joint venture between the companies. Reliance agreed to a total consideration of $ 392 million, comprising $ 340 million of initial payment and $ 52 million of drilling carry obligations. The drilling carry obligations will provide for 75% of Carrizo's share of development costs over an anticipated two year development programme.

The joint venture will have approximately 104,400 net acres of undeveloped leasehold in the core area of the Marcellus shale in central and northeast Pennsylvania, of which Reliance's 60% interest will represent approximately 62,600 net acres. This acreage is expected to support the drilling of approximately 1,000 wells over the next 10 years, with a net resource potential of about 3.4 TCFe (2.0 TCFe net to Reliance).

Conventional E&P international blocks

RIL has 13 blocks in its international conventional portfolio, including 2 in Peru, 3 in Yemen (1 producing and 2 exploratory), 2 each in Oman, Kurdistan and Colombia, 1 each in East Timor and Australia; amounting to a total acreage of over 99,145 sq. km.

Reliance Exploration & Production DMCC (REP DMCC) has farmed in Block 39 (Peru) with 10% participation interest and relinquished Block 155 (Peru) where REP DMCC had 28.30% participation interest.

During the year, the following activity was undertaken as part of the exploratory campaign:

  • 2D acquisition in Yemen (Blocks 34 and 37), Oman (Block 41) and Peru (Block 39). The total 2D acquisition was 1395 LKM. 

  • 3D acquisition of 800 and 400 sq.km. of 3D in Colombia Borojo North and South respectively. 

  • Drilled 3 exploratory wells, 1 each in East Timor, Rovi and Sarta. Drilling in Timor was met with limited results.

The results following the drilling campaign in blocks Oman 18 and East Timor K have not been encouraging and accordingly, the expenditure incurred on these blocks amounting to $177 million (Rs. 807 crore) has been fully provided for in the books of REP DMCC, a wholly-owned subsidiary of RIL.
http://www.ril.com/html/business/exploration_production.html

CAG to take 5 months to complete Reliance's KG Audit

May 17th, 2010adminNo comments

India's top auditor CAG has said that audit of the D-6 oil block in the Krishna-Godavari basin operated by Reliance Industries is likely to take 4-5 months more to be finished.

"We require 4-5 months to complete the audit… The process would take time, as this is the first time that we are looking at a private player's books… It's a very detailed process", Comptroller and Auditor General Vinod Rai said.

The CAG is auditing Rs 45,000 crore capital spending by RIL, which is controlled by Mukesh Ambani, to tap natural gas from the D-6 block in K-G basin, following a request from the petroleum ministry in 2007.

He said that RIL had submitted all related documents sought by CAG by the end of January this year.

"All the firms, including RIL, have submitted required documents that we have sought," said Rai.

However, a Reliance Industries spokesperson refused to offer any comment on the issue.

In a hard-pitched battle last year between the Ambani siblings, younger brother Anil Ambani had alleged that Mukesh-controlled RIL had inflated capital spending to Rs 45,000 crore from the initial estimate of Rs 12,500 crore for the D-6 block.

CAG's scope of audit is in respect of the block KG-DWN-98/3 (KG-D6) awarded to RIL for two financial years — 2006-07 and 2007-08 — with access to records of previous years linked to transactions in these years.

It is also understood that the scope of this audit will far exceed the normal course of audit by the CAG and the prime objective may be to detect fraud, if any, by the operator (RIL), allegedly in collusion with oil regulator DGH and the Ministry of Petroleum and Natural Gas.

In 2007, the Petroleum Ministry had asked the CAG to conduct an audit of seven oil and gas blocks, including RIL's KG-D6 block. After initial reluctance, the CAG is now conducting the audit of four oil & gas blocks, namely KG-D6 of RIL, the Barmer and Ravva oilfields being operated by Cairn India and the Panna-Mukta-Ta.

Source:http://www.hindustantimes.com/RIL-s-K-G-basin-audit-to-take-4-5-months-to-complete-CAG/Article1-544355.aspx

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Reliance KG D6 gas saves 32% in fertilizer subsidy: Govt

May 3rd, 2010adminNo comments

Reliance Industries' KG-D6 gas has saved 32 per cent in fertiliser subsidy as urea making plants shifted from costlier liquid fuels to cheaper gas, the Rajya Sabha was informed today.

"The reduction in naphtha usage in existing gas-based unites has reduced the subsidy cost to the government by approximately 32 per cent. The reduction in subsidy by shifting to natural gas has resulted in savings of subsidy bill," the minister told the Upper House in a written reply.

Fertiliser subsidy is pegged at Rs 49,980.73 crore in 2010-11 fiscal from Rs 52,980.25 crore in the previous year. In 2008-09 fiscal, subsidy was over Rs 1,00,000 crore.

Under fertiliser subsidy, the government would provide Rs 15,980.73 crore for indigenous (urea) fertilisers, Rs 5,500 crore for imported (urea) fertilisers and Rs 28,500 crore for sale of decontrolled fertilisers (DAP, MOP and complexes) with concession to farmers.

Source:http://economictimes.indiatimes.com/news/economy/finance/Reliance-KG-D6-gas-has-saved-32-in-fertiliser-subsidy-Govt/articleshow/5878007.cms

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NTPC may sign for additional KG-D6 gas

April 23rd, 2010adminNo comments

State-run power producer NTPC is likely to sign contracts next week to buy an additional 1.51 million cubic meters a day of gas from Reliance Industries at government-approved price of $4.2 per mmBtu.

The additional gas would be used at NTPC's Anta and Auriya plants in Rajasthan, Dadri unit in Uttar Pradesh and Faridabad plant in Haryana, official sources said.

Since these plants have already signed Gas Sales and Purchase Agreements (GSPA) for volumes totaling 1.81 mmcmd, only side-letters need to be signed for additional gas.

Sources said side-letters may be signed next week.

This follows Power Ministry's ultimatum to NTPC to sign contracts immediately. While the government had allocated 4.46 mmcmd of gas from RIL's eastern offshore KG-D6 field, NTPC has so far signed only for 1.81 mmcmd.

At a recent review of gas withdrawal from RIL's eastern offshore KG-D6 fields, it was informed that the government had allocated 31.1 mmcmd gas to power sector on firm basis and an additional 12 mmscd on fall back or temporary bais. Against this, only 30.11 mmcmd was been drawn by the power utilities.

It was stated at the meeting that if the power utilities continue to draw less quantity of gas than what has been allocated, there is a possibility that the unutilised gas is allocated to other sectors, they said.

Of the 4.46 mmcmd allocated to NTPC, 2.65 mmcmd was for its Kawas and Gandhar power plants in Gujarat. But the state- owned firm did not want to use KG-D6 gas at these plants since it was in litigation with the Mukesh Ambani firm over fuel supplies to expansion projects planned at these sites.

So, an Empowered Group of Ministers (EGoM) last year decided that the state gas utility GAIL India will swap KG-D6 gas with fuel from other fields. Under this scheme, gas from western offshore Panna/Mukta and Tapti (PMT) fields that was currently supplied to NTPC's northern India plants, was to be diverted to Kawas and Gandhar. The deficit at the northern India plants was then to be made up by KG-D6 gas.

But since PMT gas supplies to NTPC's northern plants was only 1.51 mmcmd, a swap of only that volume has been affected.

Sources said GAIL has decided that 1.51 mmcmd of PMT gas that is currently being supplied to NTPC's northern power plants would be diverted to Kawas and Gandhar. The northern plants will then be supplied KG-D6 gas.

NTPC currently buys 0.79 mmcmd of KG-D6 gas at its Anta, 0.54 mmcmd at Dadri, 0.26 mmcmd at Auriya and 0.22 mmcmd at its Faridabad unit.

With the swap, supplies would go up to 3.31 mmcmd.

RIL currently produces 63-64 mmcmd of gas against a potential of 80 mmcmd as government nominated customers like NTPC are yet to offtake their full allocated quantity.

Source:http://www.business-standard.com/india/news/ntpc-may-sign-for-additional-kg-d6-gas/92099/on

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Reliance finds more gas in KG basin

April 12th, 2010adminNo comments

Reliance Industries has informed oil regulator DGH that four smaller gas finds surrounding the D-1 and D-3 fields in the Krishna-Godavari basin can be commercially exploited.

RIL on February 19 informed the oil regulator Directorate General of Hydrocarbons (DGH) that four smaller gas finds, surrounding the D-1 and D-3 fields, which are currently producing around 62 mmscmd of gas, can be commercially exploited, sources in know of development said.

RIL estimates that four smaller gas finds in the prolific KG-D6 block may contain 1-2 Trillion cubic feet of reserves and may help prolong peak output of 80 million standard cubic meters per day (mmscmd) from the block, sources said.

"These four finds were made in 2008 and RIL had at that time notified them as discoveries. They have now submitted 'Potential Commercialilty Interest' which means that they can be exploited commercially," a source said.

Once DGH approves commerciality, RIL will submit a detailed development plan, detailing investment and production potential.

RIL has so far made 25 oil and gas discoveries in KG-D6, of which two – D1 and D3, have been put on production at an investment of $ 8.836 billion. Besides D1 and D3 gas fields and MA oil discovery, nine other gas finds were previously declared commercial and now four more may be added to the list.

In 2008, RIL submitted plans to invest $ 5.91 billion in nine satellite finds but later pruned the list to just four considering government-fixed gas price of $ 4.20 per million British thermal unit did not justify such high additional investment.

The company on December 29 revised this to $ 1.5 billion spanning 0.6 Trillion cubic feet recoverable reserves in the four finds that could produce 10 mmscmd for 6 years.

The remaining five discoveries had been kept for developing at a later date, sources said adding these five and the four finds that are now in the process of being declared commercial may be clubbed together for development.

It will take 4-5 years to bring to production the four finds for which field development plan (FDP) has been submitted and the other finds may not come into production before 2016 by when D1 and D3 output would have hit decline phase.

The discoveries would be tied-up with Dhirubhai 1 and 3 (or D1 and D3) production facilities, which are designed to handle 80 mmscmd of output.

Sources said the mining licence for most of the 1.9 million acres of KG-DWN-98/3 or KG-D6 block has expired that it would need extension from the government to do additional exploration work.
The mining lisence expiry, however, may not impact the approved commercial finds which would be more governed by the field development plan approved by the DGH and the government.

Source:http://beta.thehindu.com/business/article392880.ece

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Reliance: producing 63-64 mmscmd from D6 block

April 7th, 2010adminNo comments

Reliance Industries today said it is producing 63-64 million standard cubic meters per day of gas from KG-D6 fields, over 20 per cent less than the potential due to constraints in pipelines transporting the fuel to consumers.

"We have already tested facilities for producing (peak output of) 80 mmscmd (from eastern offshore KG-D6 fields) … we are however maintaining production at 63-64 mmscmd currently," RIL Executive Director P M S Prasad told reporters here.

The company is forced to restrict output as state-owned gas utility GAIL's pipelines in the west and north India do not have capacity to transport additional gas.

"There is pipeline constraint," he said. GAIL hopes to complete expansion of its main trunk line HVJ this year after which more gas can be moved to consumers.

Prasad said RIL was currently producing about 21,000 barrels per day of oil from the D6 block and would need to drill 1-2 more wells to reach the peak output of 35,000 bpd.

Source: http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/Supply-contraints-restrict-KG-D6-gas-output-at-63-mmscmd-RIL/articleshow/5768102.cms

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Reliance's KG Gas provides relief to power and fertilizer firms

April 5th, 2010adminNo comments

Natural gas from Reliance Industries' prolific D6 field has generated savings worth thousands of crores of rupees for power and fertiliser companies, the main users of the gas.

Commercial production from the field in the Krishna Godavari (K-G) basin started on April 2 last year.

The gas-based power industry is estimated to have saved Rs 6,000 crore over the last year, while the government's fertiliser subsidy bill is estimated to be lower by Rs 3,100 crore.

Users within the country could get gas from the D6 field, located off the Andhra cost, at a landed cost of $ 4.2 per million British thermal units (mBtu). This price was much lower than alternates like imported liquefied natural gas (LNG), the price of which touched over $20 per mbtu. It was, however, higher than the subsidised price at which the government sold gas to select customers.

NTPC, the country's largest power producer, could reduce its pricey LNG imports as domestic gas became available. The power sector, the biggest consumer of K-G gas, was sold about 18 mscmd of gas, used across 4,745 Mw of power capacity.

According to industry experts, the cost of generating power from naphtha, assuming a naphtha price of $10 per mBtu, would be Rs 3.97 per unit, while the cost of generation from KG-D6 gas assuming a delivered price of $6 per mBtu would be Rs 2.50 a unit. "Depending on the current price of naptha (which is an alternative feedstock), the power sector is estimated to have saved about Rs 6,000 crore while using gas as feedstock," said Rakesh Jain general manager (energy division) at Feedback Ventures.

These savings have gone to the pocket of the consumer, according to Jain, since most producers have agreements with the state power utilities to simply pass on the cost of fuel to the consumers.

The average saving to a household in Andhra Pradesh, a state which houses some of the plants to which the D6 gas has been allocated, would be as much as Rs 300 per month, according to industry experts.

This is assuming an annual power consumption of 2,448 kilowatt hour.

The fertiliser sector also benefitted, as it switched to gas.

"It has been a very good experience. The supplies have been stable, leading to smooth operations, and we did not use any naphtha (as fuel) in the past one year. The subsidy saving to government from our plant alone is around Rs 100 crore," said Kapil Mehan, executive director, Tata Chemicals.

The company is using 0.88 million standard cubic metres a day (mscmd) of K-G gas at its fertiliser plant in Babrala (Uttar Pradesh). The total gas supply to fertiliser sector during 2009-10 was 12.24 mscmd, which translated to a production of 6.10 million tonne of urea.

The D6 field is currently producing 60 mscmd of gas.

The government, through its gas utilisation policy, has made allocations to various priority sectors like power, fertiliser, steel, city gas, refineries, petrochemicals, LPG and captive power.

The power sector has been allocated 31.165 mscmd of gas on a firm basis and another 12 mscmd of gas on fallback basis. The fertiliser sector has been given firm allocation of 15.508 mscmd, refineries have been given 5 mscmd of firm allocation and 6 mscmd of fallback allocation and the steel sector has been given 4.19 mscmd firm allocations.

A fallback allocation implies that the sector will get gas if the firm allocation of other sectors is not fully consumed due to some reason.

Source:http://www.business-standard.com/india/news/power-fertiliser-firms-reap-gains/390496/

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Reliance gas will power South Indian houses from 2012

March 22nd, 2010adminNo comments

Union Petroleum Secretary S Sundareshan on Saturday said that south India will start getting natural gas from the Krishna-Godavari basin from 2012.

The Ministry of Petroleum and Natural Gas had called for a meeting of Reliance Industries Ltd (which owns the gas fields) and Gas Authority of India Ltd (which lays pipelines) about ten days ago and told them to implement the project in a "strict timeframe".

Reliance has been authorised by the government to lay a pipeline from Kakinada to Chennai and this pipeline would further extend to Tuticorin. Reliance would also lay a pipeline between Chennai and Bangalore, he told a press conference here.

The gas would start flowing to Tamil Nadu anytime between March 2012 and the end of that year, he said. There would be connectivity to Madras Fertilisers Ltd and SPIC, he said, referring to the two fertiliser companies, whose operations are suffering for want of natural gas.

On the issue of pricing of petroleum products, he said, "It is not possible to insulate consumers continuously from the volatile international crude price and the government has to take a hard decision in the future."

At present, subsidy component for petrol is Rs.5 per litre, for diesel Rs. 3, for kerosene Rs. 16 and for LPG Rs. 260 a cylinder. Due to under-pricing the government had incurred an expenditure of Rs.45,000 crore in the current financial year.

Poor people were forced to pay for supplying subsidised petrol and petroleum products to those who were affluent.

The Secretary said oil marketing companies were fully geared to meet the increasing demand for petroleum products, which had been going up at 15 per cent per annum for petrol, 8 to 9 per cent for diesel, and 10 per cent for LPG. In Tamil Nadu, there had been a 10 per cent increase of LPG consumers every year. The State had achieved a coverage of 75 per cent in respect of LPG supply, which might increase to 83 per cent in the next four or five years.

There was no shortage of LPG in the State and new connections were being released to prospective consumers without any waiting list and efforts were being made to supply refills expeditiously.

Source:http://www.hindu.com/2010/03/21/stories/2010032159130100.htm

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