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<keyword id="6355199" type="CITY" weightage="20" keywordseo="Reliance-Industries">Reliance Industries</keyword>' partners are considering joining the arbitration that the Mukesh Ambani-run firm is planning to initiate against the government for slapping a USD 1.55 billion demand for "unfairly enriching" by producing natural gas belonging to <keyword id="6354737" type="CITY" weightage="20" keywordseo="ONGC">ONGC</keyword>. 
 According to a news agency, <keyword id="3818195" type="UNKNOWN" weightage="20" keywordseo="calgary-based-niko-resources-ltd">Calgary-based Niko Resources Ltd</keyword>, which holds 10 per cent interest in RIL-operated KG-DWN-98/3 or KG-D6 block, said the partners believe they are "not liable for the amount claimed by the <keyword id="6377129" type="ORGANIZATION" weightage="20" keywordseo="Government-Of-India">Government of India</keyword>." 
 In an emailed statement, it said it "is considering joining RIL in invoking the dispute resolution mechanism in the Production Sharing Contract (<keyword id="6367605" type="ORGANIZATION" weightage="20" keywordseo="PSC">PSC</keyword>)." 
 The oil ministry had on November 3 issued a notice to RIL, <keyword id="570359" type="COMPANY" weightage="20" keywordseo="Niko">Niko</keyword> and UK's <keyword id="32848" type="ORGANIZATION" weightage="20" keywordseo="BP">BP</keyword> plc seeking USD 1.47 billion for producing in the seven years ended March 31, 2016 about 338.332 million British thermal unit of gas that had seeped or migrated from state-owned Oil and <keyword id="123483" type="CITY" weightage="20" keywordseo="Natural-Gas-Corp">Natural Gas Corp</keyword>'s (ONGC) blocks into adjoining KG-D6 in <keyword id="55869" type="UNKNOWN" weightage="20" keywordseo="Bay-of-Bengal">Bay of Bengal</keyword>. 
 
After deducting USD 71.71 million royalty paid on the gas produced and adding an interest at the rate of Libor plus 2 per cent, totalling USD 149.86 million, a total demand of USD 1.55 billion was made on RIL, BP and Niko. 
 
RIL had on Friday stated that it "proposes to invoke the dispute resolution mechanism in the PSC and issue a Notice of Arbitration to the Government." 
 
"RIL remains convinced of being able to fully justify and vindicate its position that the government's claim is not sustainable," the company had said, adding it has worked within the boundaries of the KG-D6 block awarded to it and has complied with all applicable regulations and provisions of the PSC. 
 
"The claim of the government is based on misreading and misinterpretation of key elements of the PSC and is without precedent in the oil and gas industry, anywhere in the world," it had said. 
 
BP, which holds the remaining 30 per cent interest, said it is evaluating its options. 
 "BP believes that the action taken is neither in line with well-established global practices nor is it in line with the PSC. We are aligned and working with our partners to evaluate our options to achieve an effective resolution," a <keyword id="367087" type="COMPANY" weightage="20" keywordseo="BP-India">BP India</keyword> spokesperson said. 
 Originally, ONGC had sued RIL for producing gas that had migrated from its blocks KG-DWN-98/2 (KG-D5) and <keyword id="2141893" type="UNKNOWN" weightage="20" keywordseo="Godavari-PML">Godavari PML</keyword> in the KG basin to adjoining KG-D6 block of RIL. 
 Under direction of the <keyword id="6355014" type="ORGANIZATION" weightage="20" keywordseo="Delhi-High-Court">Delhi High Court</keyword>, the government had appointed a one-man committee under retired Justice A P <keyword id="1858" type="PERSON" weightage="20" keywordseo="Shah">Shah</keyword> to go into the issue. The panel in its report on August 29 felt that the government and not ONGC is entitled to compensation. 
 
Subsequently, the ministry asked its upstream technical arm DGH to calculate the amount of compensation and a demand notice was slapped on RIL-BP-Niko. 
 
"The committee has concluded that the contractor's (RIL- BP-Niko) production of migrated gas and retention of ensuing benefits amounts to unjust enrichment, since the production sharing contract (PSC)... does not permit a contractor to produce and sell migrated gas," the November 3 demand note said. 
 
The ministry said it had accepted the Shah committee report and consequently "it has been decided by the government to claim restitution from the contractor of the block KG-DWN- 98/3 for the unjust benefit received and unfairly retained by them".

Partners
 of Reliance might be joining arbitration in $1.55 bn gas
row

The final report on the gas dispute between the state-owned ONGC and Reliance Industries was submitted, stating that natural gas worth more than Rs 11,000 crore migrated from idling ONGC’s KG fields to adjacent KG-D6 block. 
 
US-based consultant DeGolyer and MacNaughton (D&amp;M) submitted its final report to the Directorate General of Hydrocarbons (DGH), a senior government official said here. 
 
"The report more-or-less reiterates what D&amp;M had stated in the draft report that some gas had indeed migrated from ONGC's Krishna Godavari basin blocks to RIL's KG-D6 fields", he said. 
 
Now, the report will be examined to conclude that on how and to what extend should ONGC be compensated for its gas being produced by RIL. 
 
"The Supreme Court had in its order (on ONGC petition on its gas being produced by RIL) stated that government will have to in six months from the date of receipt of D&amp;M report decide on addressing ONGC contention. That we will do,” the government official said. 
 
D&amp;M, in its report, established that reservoirs in ONGC's Krishna Godavari basin KG-DWN-98/2 (KG-D5) and the Godavari Producing Mining Lease (PML) are connected with Dhirubhai-1 and 3 (D1 &amp; D3) field located in the KG-DWN-98/3 (KG-D6) Block of RIL. 
 
It states that as much as 11.122 billion cubic meters of ONGC gas has migrated from Godavari-PML and KG-DWN-98/2 to KG-D6. 
 
Of the 58.68 bcm of gas produced from KG-D6 block since April 1, 2009, 49.69 bcm belongs to RIL and 8.981 bcm could have come from ONGC's side, D&amp;M said. 
 
At gas price of $4.2 per million British thermal unit, the volume of gas belonging to ONGC which RIL has produced comes to $1.7 billion (Rs 11,055 crore). 
 
ONGC had in 2013 claimed that RIL had deliberately drilled wells close to the common boundary of the blocks and that some gas it pumped out was from its adjoining block. 
 
RIL, on the other hand, has maintained that it has "scrupulously followed every aspect of the production sharing contract and has confined its petroleum operations within the (boundaries of its) KG-D6 block" in Krishna Godavari basin. 
 
D&amp;M estimated that ONGC's Godavari-PML had 14.209 bcm of gross in-place reserves and KG-D5 another 11.856 bcm. RIL's D&amp;D3 fields held 80.697 bcm gross in-place reserves. 
 
Of these, 12.80 bcm of Godavari-PML, 8.01 bcm of KG-D5 and 75.33 bcm of KG-D6 are connected, it said. 
 
It estimated that 11.89 bcm of gas from ONGC blocks would have migrated to KG-D6 by January 1, 2017. This volume would rise to 12.713 bcm by May 1, 2019. 
 
The volume of gas remaining after this would not be economically viable for ONGC to develop. 
 
D&amp;M was jointly appointed by ONGC and RIL to find if the neighbouring fields are connected.

Mukesh Ambani might soon find himself paying a hefty compensation to ONGC

The government has slapped a $ 1.55 million fine on <keyword id="6355199" type="CITY" weightage="100" keywordseo="Reliance-Industries">Reliance Industries</keyword> and its partners for extracting natural gas that came under the state-owned <keyword id="6354737" type="CITY" weightage="20" keywordseo="ONGC">ONGC</keyword> in the KG basin over the past seven years. 
 According to sources, a notice regarding the same has been sent to <keyword id="6484187" type="CITY" weightage="20" keywordseo="RIL">RIL</keyword> by the <keyword id="46040" type="ORGANIZATION" weightage="20" keywordseo="Oil-ministry">Oil Ministry</keyword>. 
 In a report by the <keyword id="2967413" type="UNKNOWN" weightage="20" keywordseo="Justice-A-P-Shah-Committee">Justice A P Shah Committee</keyword> presented to the Oil Ministry, it said that the Mukesh Ambani-led firm should pay the government for the gas that had seeped from ONGC blocks into its fields. 
 
"RIL's action of producing and selling gas migrated from ONGC block is unjust enrichment. Over 11 billion cubic metres of gas had flowed from the ONGC block to RIL's fields between April 1, 2009 and March 31, 2015. Of this, RIL has already produced about 9 bcm," the report said. 
 
The panel, however, said the compensation should go to the government and not ONGC. 
 
"The Government of India, and not ONGC, is entitled to claim restitution from RIL for the unjust benefit it received and unfairly retained. ONGC has no locus standi to bring a tortuous claim against RIL for trespass/conversion since it does not have any ownership rights or possessory interest in the natural gas," the committee said. 
 
As much as 11.122 billion cubic meters of gas worth Rs 11,000 crore at present, had migrated from its Godavari-PML and KG-DWN-98/2 blocks to adjoining KG-D6 of RIL between April 1, 2009 and March 31, 2015. This has emptied the ONGC’s reservoirs. 
(image: Indiatimes)

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Partners of Reliance might be joining arbitration in $1.55 bn gas row

BI India Bureau

Mukesh Ambani might soon find himself paying a hefty compensation to ONGC

BI India Bureau

Government slaps $1.55 billion penalty on Reliance Industries

BI India Bureau

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