Sending a clear message to companies in the oil and gas exploration sector, Minister of State (Independent Charge) for Petroleum & Natural Gas Dharmendra Pradhan on Monday said the provisions of contracts give the Ministry the right to carry out audits of all fields.

He was responding to a question on audit of oil and gas contracts and whether the Government proposes to make it mandatory to avoid unnecessary legal disputes with the explorer.

The Minister in a written reply in the Lok Sabha said: “Ministry of Petroleum & Natural Gas exercises its right to carry out audit of all fields, pre-NELP and NELP blocks as per the provisions made in Section 1.9 of the Accounting Procedure of the production sharing contract.”

The Ministry has been witness to the stand-off between the Government auditor – Comptroller & Auditor General – and operator of the KG-D6 block Reliance Industries Ltd on the scope of the audit. The stand off ended after the Ministry played the role of the peacemaker. A production sharing contract is signed between a contractor and the Government for carrying out hydrocarbons exploration and production work. Reliance had sought legal clarity on the scope of CAG audit. It had asked whether it will be a financial audit or performance audit, whether CAG is the auditor and RIL is the entity that will be audited.

Responding to another question on the crude oil and gas production targets, Pradhan said the projected domestic oil and gas production was insufficient to meet the estimated demand. Under the production sharing contract regime, discoveries made are required to be developed in accordance with the specified timeline.

During the last three years (2011-12 to 2013-14) and the current year (2014-15 till date), a total of 40 discoveries (18 oil and 22 gas) have been made in onland and offshore areas by the public sector entities as well as private and foreign companies.

Out of these, declarations of commerciality have been reviewed for four discoveries by the respective block management committees resulting in accretion of 211 million barrels (mmbbls) of oil and 3.54 billion cubic meters (BCM) of gas in-place volume, the Minister said.

The corresponding recoverable reserves are to the tune of 27.8 mmbbls of oil and 1.39 bcm of gas respectively. Other discoveries are in various stages of evaluation/appraisal.