RIL to Share KG-D6 Books with CAG under PSC Terms

Co agrees to oil minister's demand after he assures that govt will speed up various approvals  Reliance Industries has agreed to share KG-D6 accounts with the national auditor under the terms of the production-sharing contract (PSC), meeting a key demand of oil minister Jaipal Reddy ahead of a crucial meeting of the block's management committee. Reddy had asked the company to provide data for audit last month, when he assured RIL executive director PMS Prasad and BP India head Sashi Mukundan that the government would speed up approvals for various proposals in four blocks, including KG-D6.  Along with the assurance, the ministry had said in a statement that "company representatives were requested to make all the records and accounts of the KGD6 block available to the Comptroller and Auditor General (CAG) as provided for in the production-sharing contract".  While the government has asked RIL to share accounts with the national auditor under a contractual provision that calls for a financial audit, the CAG has taken a different approach and separately written to various contractors seeking information for performance audit under the CAG Act, government and industry sources said. The ministry regards CAG as the government's auditor for various purposes, including audit provided for under the PSC. Sources close to RIL said the company had recently written to the government, saying it accepts the ministry's view and will provide the oil ministry with whatever information the CAG demands for audit under the PSC. A spokesman for Reliance declined to comment.  The management committee (MC) of RIL's KG-D6 is scheduled to consider the commercial viability of three new gas discoveries on Tuesday. The meeting follows more than a year of tensions between the oil ministry and the company as the government blames RIL for the sharp fall in D6 output. Reliance says production fell because of geological complexities.  The oil ministry has asked joint secretary (exploration) to attend the management committee meetings of KG-D6 himself instead of nominating another official, which has been the practice for about two years. Senior officials of the ministry and the Directorate General of Hydrocarbons (DGH) had met on Saturday — which was not a working day — to discuss the strategy they would adopt in their dealings with RIL.  Tuesday's meeting will consider 'declaration of commerciality' of the D29, D30 and D31 discoveries in the KG-D6 block, which was submitted for government's approval in February 2010. The company can develop the fields only after government approval. Tuesday's meeting is expected to be attended by the Director General of Hydrocarbons, who had been sending a junior official to represent him for the past two years. The oil ministry's financial advisor, who earlier represented the ministry in the MC meeting, instead of the joint-secretary, will now be an invitee in the meeting. "It means that for the government, the buck will stop at the DGH and the joint secretary for any omission or commission in MC decisions," an official with direct knowledge of the matter said.  According to the PSC, the DGH is the chairman and the joint secretary is the vice-chairman of the MC, which takes decisions worth billions of dollars. The operator of the block is the secretary of the MC and consortium partners are its members. The MC meetings are called by the operator of the block.  In an earlier meeting in 2011, RIL's proposal for declaration of commerciality (DoC) of D29, D30 and D31 discoveries in the DG block were rejected by the MC because the operator did not conduct conventional testing to ascertain that gas was present in commercial quantities.  Sources close to RIL said the company had used a more modern, internationally prevalent method, but government officials said they will go by what is written in the contract. Sources said the matter may be referred to the oil minister or the Cabinet Committee on Economic Affairs (CCEA), although MC decisions are final and do not require further approval. In a meeting with RIL representatives on July 13, oil minister Jaipal Reddy had cautioned the operator that the government would withhold the work plan and budget of D6 block unless CAG is given access to records, officials said.  rajeev.jayaswal@timesgroup.com