A file photo of an ONGC facility.
A file photo of an ONGC facility.

PMT fields: Govt to serve demand notice to RIL-ONGC-Shell consortium

Oil ministry looks to recover revenue share dues from hydrocarbon production at the fields in the Arabian Sea after an arbitration panel ruled mostly in favour of the govt

The oil ministry is set to issue a demand notice to a consortium of Reliance Industries-Shell India and Oil and Natural Gas Corp. in a bid to recover revenue share dues from hydrocarbon production at the Panna-Mukta-Tapti fields in the Arabian Sea after a London-based arbitration panel ruled mostly favouring the government earlier this month.

According to a person familiar with the development, who spoke on condition of anonymity, the government on 12 October received a favourable order on two issues relating to its share of revenue from the fields.

The panel ordered that marketing margin levied by the companies from customers have to be included in the revenue to be shared with the government and that only the actual taxes paid by the contractors can be allowed as a cost and not any notional tax rate mentioned in the contract signed in 1994. In the 1994-95 financial year, corporate tax rate ranged between 45% and 65% depending on tax residence (domestic or foreign) and public interest in the company, compared to 30% at present without surcharge.

On a third aspect, the government received “mostly a favourable order" with an option for companies to file appeals before the tribunal within a month. Based on the two orders that are final with no option for appeals, the oil ministry will calculate the dues and issue notice without waiting any further, said the person. The dues are yet to be calculated.

The companies maintained that the order was only partial and that they still have a window to fight the case.

Even after the panel decides on every aspect of the dispute, dissatisfied parties are free to approach English courts for further relief.

The arbitration was filed by Reliance and British Gas Exploration and Production India Ltd, while ONGC did not participate. BG, the operator of the field, has been taken over by Shell in a deal between the parents Royal Dutch Shell Plc. and BG Group Plc, completed in February.

A Reliance spokesperson said, “With respect to the arbitration in Panna-Mukta and Tapti fields, the arbitration tribunal has by majority issued a final partial award (“FPA"), and separately, two dissenting opinions. RIL is presently in the process of reviewing the FPA and the dissenting opinions in detail and shall be taking the appropriate next steps based on legal advice."

A spokesperson for Shell India said the company was reviewing the final partial award in detail and was unable to share any further specific details due to confidentiality restrictions.

“We respect the decision of the Tribunal and are committed to following the due processes applicable to legal proceedings of this nature," said the spokesperson.

The Reliance spokesperson added that the tribunal has scheduled a procedural hearing on 18 and 19 December, where the procedural timetable of the arbitration is likely to be decided. “At this point in time, the financial consequences of the findings in the FPA are difficult to ascertain and clarity shall emerge after the tribunal decides upon the liabilities accruing to either parties after further hearings."