Govt loses gas migration arbitration against RIL and partners
The dispute pertains to a $1.55 billion penalty imposed on RIL and its partners by the Indian government over allegedly exploiting gas reserves belonging to ONGC in the course of their own drilling activities
New Delhi: In a major victory for Reliance Industries Ltd (RIL), controlled by Mukesh Ambani, and its partners BP Plc and Niko Resources Ltd, an international tribunal has awarded in their favour in the gas migration dispute with the Indian government.
In addition, the tribunal also awarded costs of $8.3 million to be paid by the government to the consortium.
The dispute pertains to a $1.55 billion penalty imposed on RIL and its partners BP Plc and Niko Resources Ltd by the Indian government over allegedly exploiting gas reserves belonging to state-run Oil and Natural Gas Corporation Ltd. (ONGC) in the course of their own drilling activities. The adjacent deepwater fields in question are RIL’s D6 field (KG-DWN-98/3) coast and ONGC’s KG-DWN-98/2 block, in the Krishna-Godavari (KG) basin off India’s east coast. RIL and its partners BP Plc and Niko Resources Ltd together own the D6 block.
“All the contentions of the consortium have been upheld by the majority with a finding that the consortium was entitled to produce all gas from its contract area and all claims made by the Government of India have been rejected. The consortium is not liable to pay any amount to the Government of India,” RIL said in a filing to the stock exchanges on late Tuesday evening.
The petroleum ministry had raised the demand on 4 November 2016, giving RIL one month to pay up, after the justice A.P. Shah panel told the ministry on 31 August that RIL should make up for the “unfair enrichment” it had obtained by way of retaining the gains of gas that seeped into its field from that of ONGC.
“An international arbitration panel has issued an award in favour of Reliance, BP & Niko (Consortium) rejecting completely the claims of the Government of India against the Consortium in respect of migrated gas, by a majority of 2 to 1,” the RIL statement added.
While an ONGC spokesperson did not immediately comment on the issue, a petroleum ministry spokesperson couldn’t be reached.
According to a report by DeGolyer and MacNaughton, a US-based consultancy selected by both ONGC and RIL, which was relied upon by the Shah panel for confirmation of the gas flow between the blocks, about 11 billion cubic metres (bcm) of gas migrated to KG D6 from adjacent fields between 1 April 2009 and 31 March 2015, of which 8.9 bcm was tapped by RIL.
ONGC has been unable to produce from the deepwater field off the coast of Andhra Pradesh and is scouting for a partner after Norway’s Statoil ASA and Brazil’s Petroleo Brasileiro SA (Petrobras) quit the consortium. ONGC has been battling concerns over its production capabilities and diminishing yields at its ageing oil fields. Most of the company’s domestic fields are more than 30 years old.
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