The Ministry of Petroleum & Natural Gas (MoPNG) has issued a press release requesting RIL to make all the records and accounts of the KG D6 block available to the Comptroller and Auditor General of India (CAG) which is required for its audit mandate. MOPNG cited that CAG has recommended withholding of sanction to work plans and budgets if access to record is denied to CAG.
CAG in its 8th September 2011 report on KG D6 block (whereby it had audited the account of RIL KG D6 block from FY07 to FY09) has alleged that RIL is denying access to all records and accounts of the KG D6 block disputing the scope of audit as per PSC provisions. It is to be noted that CAG has now been mandated to extend its audit of records and accounts of RIL's KG D6 block for FY10 to FY12.
The CAG enquiry would continue to serve as an overhang on the stock, particularly in a scenario of declining gas production, as it would slow down Government approvals. Further, the dispute between RIL and the oil ministry on disallowance of US$1.2bn of cost recovery would continue to act as a hindrance to faster Government approvals.
Mukesh Ambani is is finding it difficult to identify the ‘next big project’ that can drive earnings growth; hence we expect earnings growth to stay muted (EPS CAGR of only 6% over FY13-FY15 versus FY09-FY12 EPS CAGR of 5%).
