Upset over the massive ad campaign unleashed by Anil Ambani-owned Reliance Natural Resources Ltd. (RNRL) on the KG basin gas issue, the Petroleum and Natural Gas Ministry decided to take on the younger Ambani sibling terming the whole campaign “most unfortunate” especially when the matter is before the Supreme Court.
Refuting the allegations levelled by the RNRL shareholders, the official Petroleum Ministry statement terms as incorrect the allegation that in the contract of KG-D6 project, the government would get only Rs. 500 crore as against the contractor’s stake of Rs. 50,000 crore. “The government expects to, in fact, realise about Rs. 84,000 crore. The recovery of the government will be increased towards the latter part of the project,” the statement adds.
Further, it has been alleged that the Petroleum Ministry is seeking to cause a loss to NTPC. However, the statement says, the Ministry is committed to protect the interests of NTPC.
Capital expenditure
Referring to the issue of capital expenditure, the Ministry statement says, “It has been alleged that the project cost has been hiked from Rs. 12,000 crore to Rs. 45,000 crore. In November 2004, the estimated capital expenditure was $2.45 billion which was revised in December 2006 to $ 8.83 billion. The said increase has taken place on account of various factors including increase in reserves by over two and half times, production facilities by three times, peak production by two times, increase in the number of wells, field life and inflation in equipment and services industry. The figures are only estimates and cost recovery would depend on actual audited expenditure figures.”
Arm’s length principle
On gas pricing, it states that the fixation of price and allocation of gas has been undertaken pursuant to the decision of Empowered Group of Ministers. “The price formula is based on the principle of ‘arm’s length’ and in accordance with the provisions of the production sharing contract. The price formula has been approved on September 12, 2007, which leads to a price of $4.20 mmBtu of KG-D6 gas at current level of crude prices. The formula is fixed for 5 years,” the statement adds.
“The government is committed to upholding the rule of law. It cannot not enter into needless and unnecessary controversies. Suffice it to say that parties to a dispute would be well advised to reserve restraint in the matter of projection of facts as well as inferences. In view of the fact that the matter is sub-judice before the Supreme Court, the government has issued the above limited clarification so that there is no element of public misinformation,” the statement concludes.
