‘CAG’s report detrimental to both contractors & government’

After presenting its final report on audit of Reliance Industries Limited‘s (RIL’s) KG-D6 gas block, Comptroller and Audit General (CAG) body has invited a lot of negative press as far its process of gauging industry procedures is concerned.

CAG, in its audit draft report, had lashed out against RIL for allegedly overstating its costs, while also pointing a finger at the oil ministry for showing laxity in implementation and management of production sharing contracts (PSCs). Reliance Industries took a stand on the charges stated by CAG saying that CAG had missed the mark as far as gauging E&P procedures, in relation to internal and external factors, is concerned. While RIL maintains that irrespective of the report, it continues to maintain a strong adherence to global benchmarking procedures, the after math of the allegations has left many operators in oil and gas sector questioning the forethought of the audit body.

Industry experts have stepped up in support of Reliance’s stand sharing the view that the entire shenanigan put up by CAG has left a detrimental mark on the reputation of the E&P sector. Also, independent reports by experts from E&Y, IPA and Daniel Johnston & Co. Inc. have entirely validated RIL’s stand in its responses to CAG. These independent reports have acknowledged RIL’s commendable efforts in ‘bringing to stream India’s first deep water hydrocarbons production facility in record time’ and the fact an energy major as big as BP Plc has entered into a strategic partnership with RIL in this exact block further strengthens Reliance’s stand and justifies its efforts and processes to a large extent.

As for the issue that has been stretched out of proportion by CAG, one thing that finds common ground in all opinions, including those of industry leaders and experts is that CAG has obtusely relied on going by book as against gauging a situation based on current trends and economic factors. Questioning the prudence of an operator is not a part of CAG’s mandate and questioning the technical and operational judgments of an operator that were in effect the best possible judgments at the time, is a factor that must find precedence in evaluating any procedure.

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