September 20, 2011 / 7:16 AM / 8 years ago

UPDATE 1-Indian federal agency mulls case against Reliance-report

* Possible charges include lower penalty payments for Reliance

* CBI also probing possible rig-sharing deals favourable to Reliance

* CBI mulling one or more cases against firm

* Inquiry in final stages, case to be registered “very soon” (Adds details on possible charges, background)

MUMBAI, Sept 20 (Reuters) - India’s federal investigative agency is considering filing a case against Reliance Industries over alleged favored treatment for its operations of gas blocks in the Krishna Godavari (KG) basin, the Mint newspaper reported on Tuesday.

The federal auditor has criticised Reliance Industries and the government over development of a key natural gas field in the KG basin, saying in a report this month that Reliance was allowed to violate terms of its production sharing contract.

The Mint report said the CBI is probing whether penalties for failing to meet commitments were reduced, if state-run firms were forced into rig-sharing arrangements favourable to Reliance and whether officials favoured the firm in allowing it to raise capital expenditure for the KG block.

Reliance, India’s most valuable listed company, is controlled by Mukesh Ambani, the world’s ninth richest man with a net worth of $27 billion, according to Forbes.

Its shares appeared to be unaffected by the report on Tuesday, rising 0.9 percent. But the stock has fallen more than 21 percent this year as investors have worried about slowing gas output.

The Central Bureau of Investigation (CBI) is likely to name officials at the country’s upstream regulator and the petroleum ministry in the case, the newspaper said, citing officials at the federal agency who declined to be named.

Reliance Industries said earlier this month there was no evidence to suggest that costs in development of the country’s key natural gas field in the KG basin were overstated, denying the federal auditor’s report.

A Reliance Industries spokesman in Mumbai and a spokeswoman for the CBI, India’s federal investigative authority, declined to comment on the newspaper report when reached by Reuters on Tuesday.

“The preliminary inquiry against RIL and others is in final stages and very soon a case will be registered,” one of the officials at the investigative agency told the Mint newspaper, referring to Reliance Industries.

The offshore KG basin was expected to contribute up to one-quarter the gas supply for India, but lower-than-expected output has left the energy-hungry nation more dependent on expensive, imported LNG to fuel power and fertiliser plants.

In May, India’s upstream regulator said Reliance was producing 48 mscmd (million standard cubic metres per day of gas) from its main D6 block in the KG basin off India’s east coast, lower than the 60 mscmd it produced a year earlier, and far off the planned peak capacity of 80 mscmd.

Earlier this year, Reliance sold a 30 percent stake in 22 oil and gas blocks, some in the KG basin, to BP in a $7.2 billion deal, in a deal expected to boost output from the deepwater blocks with BP’s expertise in the area. (Reporting by Sumeet Chatterjee and Henry Foy; Editing by Jui Chakravorty)

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