In what could spell further trouble for Cairn India Limited (CIL) the Comptroller and Auditor General (CAG) has asked the Government to order an audit in future of the increase in spending by Cairn India on its Rajasthan oil fields, something similar to what the KG-basin fields of Reliance Industries Limited (RIL) have been subjected to.
In its final report on performance of “hydrocarbon production sharing contracts” placed before Parliament on Thursday, the CAG said Cairn India had in 2006 proposed $1.24 billion for developing the Mangala oil field in the block.
A revised field development plan (FDP) was submitted three years later in 2009 due to change in delivery point of crude oil from Barmer in Rajasthan to Salaya and later to Bhogat in Gujarat. “On June 30, 2009, the Management Committee (MC) approved the revised FDP at a cost of $2.367 billion, plus $941.05 million as the cost of the pipeline, plus $35.61 million as cost of Mangala oil field enhanced oil recovery scheme, a total cost of $3.34 billion,” it said.
The increase in revised field development plan was primarily attributed to nearly doubling of upstream capital cost during 2005 and 2007, increase in rig hiring charges and delay in project schedule.
The CAG said the Petroleum Ministry had said that the increase in capex was also due to changes in the production facilities in view of increased production rates from 1 lakh barrels per day to 1.25 lakh barrels per day.
The CAG said $201.54 million expense incurred by Cairn India on works like exploration in development area DA-1 should not be eligible for cost recovery.