Terming as ‘malicious, baseless, mischievous and ill-informed’ the advertisement propaganda by Anil Ambani Group on its gas field capex, Reliance Industries has stated that the development cost was the lowest in the world and compares favourably to any other project in India.

RIL President and CEO (Petroleum) PMS Prasad on August 20 wrote to Oil Secretary R S Pandey, saying “certain parties are bent upon holding the country’s price and national interest hostage to their own narrow commercial interests and are stopping at nothing to destroy the reputation of the country.”

“It is necessary to nip these malafide endeavours in the bud for the sake of the energy security of the country,” wrote Prasad and was a day later appointed to the board of RIL.

He said the capital expenditure for developing Dhirubhai- 1 and 3 fields in KG-D6 block had gone up from

$ 2.47 billion in 2003 to $8.83 billion because of increase in reserves by over 2.5 times, trebling of production facilities, doubling of peak production, increase in number of wells, field life and inflation in equipment and services industry.

“Despite the increase in costs, Goldman Sachs’ study of the major E&P projects across the world verifies that the finding and development costs of about $5 per barrel of oil equivalent are amongst the lowest in the world,” he said, listing F&D cost of a host of projects by global majors.

The KG-D6 cost also compared favourably to Cairn India’s Rajasthan oilfields - the other major project being developed in the country currently, Prasad wrote.

The cost of developing MARS and Bhagyam onland oil discoveries is estimated to be $3.6 billion for an estimated recoverable reserve of 390 million barrels of oil, which is about $9 per barrel of oil equivalent compared to about $5 per barrel for RIL’s deep sea gas field.

“We deeply resent all attempts being made to belittle the achievements of scores of dedicated professionals and regulators who by their tireless efforts have made this stupendous achievement possible in such a short time,” he wrote.

“It saddens us that self seeking vested interests... are also casting aspersions on one of the world’s most transparent and fair policy regimes which has been recognised as such, all over the world.”

RIL said the advertisement campaign was an attempt to destroy value created in the project and “maliciously harm the country’s reputation as an investment destination” and delay and disturb the systematic development of the field.

The increase in capex, it said, was concomitant on a massive expansion in the scope of work and debilitating market conditions that set in as crude prices broke all records.

RIL said the advertisement campaign was an attempt to destroy value created in the project, to “maliciously harm the country’s reputation as an investment destination” and delay and disturb the systematic development of the field.

The increase in capex, it said, was concomitant on a massive expansion in the scope of work and debilitating market conditions that set in as crude prices broke all records.

“Ultimately cost and profit share in a Production Sharing Contract (PSC) regime are not dependent on capex estimates but have well informed systems of checks and balances to monitor actual cost recovery,” Prasad wrote. “This includes tendering procedures, approvals by the Management Committee or the Government, statutory audits, and audit by the Government under the PSC.”

RIL stated that two independent experts appointed by DGH had validated the technical scheme for development and estimated capex as very competitive.

“However, to demonstrate the transparency and openness of systems as operated by us within the PSC in accordance with the best international petroleum industry practices, RIL has also agreed to a special audit by CAG proposed by the Government,” he stated.

Keywords: RILADAGKG-D6

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