“CAG’s abrasive audit report on Reliance Industries (RIL) reflects badly on E&P sector of Indiaâ

<p>Comptroller and Audit General’s (CAG) final audit report on alleged irregularities in production sharing contracts (PSCs) in energy and petroleum sector has finally found the light of day, but on an incongruous note. While the report has criticized the government for allowing private operator Reliance Industries Limited (RIL) to retain an entire block after the first phase of exploration in violation of its PSC, it also happened to praise the government, ratheraberrantly, for developing world-class, deep-sea infrastructure in record time. CAG has also made a recommendation that the PSC structure be modified and that the government play a more vigilant role in the operations of the same.</p>
<p>Commenting on the audit report, RIL maintained that irrespective of what the report suggests, it has put in place a global benchmark for efficiency, project completion and capital costs in developing India’s oil and gas fields in a continually challenging environment. “We are proud of our achievements,” the company statement added.</p>
<p>Enconters with CAG have been a mixed bag of emotions for all players in E & P sector. The audit reports are known to be out and out harsh on the first count. Following many discussions with the company management and analysis of situation from an operator’s perspective is the stance diluted to an extent. However, many industry experts are of the view that this entire shenanigan by CAG has somewhat made a detrimental mark on the reputation of the E & P sector. As far as making recommendations to the industry procedures is concerned, many experts are of the opinion that CAG is not necessarilytechnically sound enough to do so.</p> 
<p>As crude prices have consistently charted an escalating graph over the last five years, the production and development costs have proportionately been affected for almost all operators, especially those engaged in the deep water exploration projects. Experts, including R S Sharma, former ONCG chairman, have opined that capital investment, especially from private players in E&P space,is needed to explore and develop India’s large sedimentary resources, which lay undeveloped. Such reports which discourage foreign investment sentiments reflect badly on the industry and its players on the whole.</p>