Audit report notes excess gas cost recovery by Reliance Industries

 India`s official auditor has said that Reliance Industries continued to claim excess costs for the recovery of gas amounting to $1 billion from the Krishna-Godavari basin despite its disallowance by the government.

"The Ministry of Petroleum and Natural Gas (MoPNG) had advised (May 2012) that the operator was not entitled to recover cumulative cost of excess capacity amounting to $1,005 million (Rs 6,043 crore) created in the block up to the year 2011-12," the audit report said.

"Despite MoPNG`s directive, the operator continued to include this amount in the cost recovery for 2012-13 and 2013-14," said the report of the Comptroller and Auditor General of India tabled in Parliament on Tuesday.

The report also carried the response of Reliance Industries.

"The operator in reply stated (August 2015) that the issue is under arbitration and therefore, sub-judice. The operator refrained from providing its comments on the subject to avoid any potential prejudice to either party to the arbitration," it said.

The report also took note of an assessment by an independent expert DeGolyer & MacNaughton that indicated that some gas has also migrated from the adjacent block operated by state-run Oil and Natural Gas Corp (ONGC) to the assets awarded to Reliance Industries.

It further said if the government accepts the assessment and directs Reliance Industries to pay ONGC for the same, it may affect the financials of the said block, including costs, profits, royalty and taxes over its entire period of operation since April 2009.

"The report (of DeGolyer & MacNaughton) is presently under the consideration of a one-member committee," said the audit report, referring to the review underway by Justice A.P. Shah to look at the report and give a recommendation.