New Delhi, Aug. 7: The oil ministry today gave conditional approval to Reliance Industries and its partner BP to spend over $1 billion to ramp up production in the KG-D6 block, which needs investment to arrest an alarming fall in gas output.
The ministry also approved Reliance’s plan to commercially develop the D29, D30 and D31 fields in the KG-D6 block subject to certain conditions, officials said. The committee has asked RIL-BP to drill more wells in the three satellite gas fields — D29, 30 and 31 — at their own cost before they can be declared viable.
Officials said a petroleum ministry-controlled management committee that oversaw operations at the block decided to approve annual operating and capital expenditures for the fields pending over the past three years.
But the management committee, which normally has to approve work programmes and annual budgets before the beginning of a fiscal, gave conditional approvals in case of Dhirubhai-1 and 3 gas fields as well as the MA oilfield for 2010-11, 2011-12 and 2012-13 subject to RIL-BP submitting clarifications on certain heads.
“Whatever the contractor needs technically, administratively to raise production, we will do. Approvals will be given subject to conditions,” oil minister S. Jaipal Reddy said without elaborating.
The meeting was significant as it came close on the heels of the petroleum minister promising the contractors expeditious clearances for its investment proposals, while asking them to make all records and accounts of the block available to the Comptroller and Auditor General.
The company has shown its willingness to get block audits done according to the production sharing contract.
RIL has written to the oil ministry saying it would welcome the CAG as the financial auditor, which otherwise was done by private chartered accountants appointed by the government. But the company has questioned the CAG move to conduct a “performance audit” as there is no scope of such a scrutiny under the code.
While a financial audit scrutinises spending and reports on the use of funds, a performance audit examines the economy, efficiency and effectiveness of fund use.
With gas output at the three currently producing fields in KG-D6 halving to about 29 million metric cubic meters a day, RIL and BP are pinning their hopes on developing satellite fields to reverse the trend.
RIL is the operator of the KG-D6 block with a 60 per cent stake, while BP has 30 per cent interest. Niko Resources of Canada has the remaining 10 per cent stake.