After Comptroller and Audit General (CAG) hot pressed Reliance Industries Limited (RIL) for allegedly overstating its cost expenditure incurred on account of KG-D6 gas block and for violating production sharing contract (PSC), technical experts from the field have stepped up to possibly detach alleged allegations from factual reality and present an objective view of the situation that has now been subjected to barefaced assertions and no definite agreement.
Ernst & Young a global consulting firm, along with IPA Inc. - an industry leader in quantitative analysis of project management systems - and Daniel Johnston & Co Inc. - an independent US based consulting firm with experience of working with 40 governments and numerous independent oil companies worldwide – have conducted independent research on KG-D6 process and its cost evaluation to ascertain RIL’s actions more clearly.
E&Y performed a procurement audit on RIL’s KG-D6 acreage and confirmed that costs were correctly allocated and there exists no evidence that would suggest that KG-D6 costs were overstated in anyway. The firm confirmed this stance after carefully reviewing project management principles relevant to the assessment of KG-D6 block. With regards to the impact of escalation of capital expenditure, E&Y confirmed that any increase in capital expenditure is detrimental to both the contractor and the government.
IPA assessed the Field Development Plans (FDPS) on five essential criteria including cost overrun, cost competitiveness, slippage in execution, schedule competitiveness and operability. After carefully reviewing against these criteria, IPA rated KG-D6 as ‘a successful project’. It stated that although KG-D6 faced many execution based challenges, its FDP complies with industry standards. IPA also noted that KG-D6 projects achieved successful outcomes across most project measures including cost growth, cost competitiveness, operability performance and schedule competitiveness.
Daniel Johnston & Co. noted that sophisticated actions, including extensive drilling, seismic and geological activity undertaken in the KG-D6 region, make the block ‘one of the most extensively appraised frontier, ultra-deep water blocks in the world’. The exploration, appraisal and development operations carried out by Reliance in the KG-D6 block are entirely consistent with GIPIP. It also affirmed that DGH’s decision to treat the entire block as a ‘discovery area’ was a reasonable decision fully supported requisite data and the situation.
The consensus averaged out by these independent researches completely validate RIL’s stand in its reply to CAG’s accusations. Coming from such eminent bodies in the field, the insight purported by each of these firms has almost authenticated Reliance’s actions and procedures to a large extent.