Indian Auditor to Scrutinize CBM Deals

The national auditor has told the oil ministry that it will also scrutinise coal bed methane (CBM) blocks awarded to firms such as Reliance Industries, Essar Oil, Reliance Power and Great Eastern Energy, Economic Times has reported.

It has also advised the government that all future contracts with operators of oil and gas fields should unambiguously mention that their operations would be scrutinised by the Comptroller and Auditor General of India, the newspaper said citing a government officials.

The CBM contracts are governed by the system of production-linked payment, unlike the production-sharing contracts in which the field operator is entitled to recover costs and can gain by overstating expenditure.

CBM blocks are already facing regulatory problems. Two blocks held by RIL in Madhya Pradesh and one by Essar in West Bengal have not been able to produce gas for a year as the oil ministry has not approved their pricing formula.

Great Eastern Energy is the only company which is currently producing CBM in commercial quantity and is selling it for $6.8 per unit. Reliance Industries and Essar have already developed their CBM blocks, while Reliance Power is developing its block. State-run ONGC, which is in the process of leasing out four CBM blocks to private operators, has invited bids from international energy firms.