1. Reliance Industries $3 bn penalty: RIL says government demand premature

Reliance Industries $3 bn penalty: RIL says government demand premature

RIL on Tuesday termed the government’s notice demanding $3 billion in penalty for the Panna-Mukta-Tapti oilfields in the Arabian Sea ‘premature.

By: | New Delhi | Published: July 19, 2017 5:28 AM
Reliance Industries, Royal Dutch Shell, ONGC The penalty amount will have to be paid by RIL, Royal Dutch Shell and ONGC proportionate to their participating interest of 30%, 30% and 40%, respectively, in the fields. (Reuters)

Reliance Industries (RIL) on Tuesday termed the government’s notice demanding $3 billion in penalty for the Panna-Mukta-Tapti oilfields in the Arabian Sea ‘premature’ and said the company has already challenged the partial award before the English courts and the matters are, as such, sub judice.

The government’s move followed a “partial” arbitration award in its favour over cost recovery in the fields in the Arabian Sea.

“The quantification of liabilities (if any) of the parties arising out of the partial award have to be determined by the arbitration tribunal after the parties have made their respective submissions on quantification. The arbitration tribunal is yet to schedule the timeline for the quantification phase. Apart therefrom before the process of quantification can commence certain outstanding issues will have to be resolved. RIL has already responded to the government’s demand notice appropriately,” an RIL spokesperson said.

The penalty amount, as calculated by the Directorate General of Hydrocarbons (DGH), will have to be paid by RIL, Royal Dutch Shell and ONGC proportionate to their participating interest of 30%, 30% and 40%, respectively, in the fields.

In October 2016, the London-based tribunal had issued a final partial award upholding the India government’s view that the profit from the fields should be calculated after deducting the prevailing tax of 33% instead of 50% rate that existed earlier.

The dispute relates to an arbitration initiated in December 2010 over recovery of cost of operations by RIL and British Gas (BG). Shell became the operator of the field last year after taking over BG. RIL maintains that since the arbitration had awarded a final partial award, it still has the window to appeal.

PTI reported quoting sources that the DGH in May-end slapped the demand notice on the firms, which included interest and certain other charges over a gross amount it calculated following the October 2016 final partial award (FPA).

“The notice does not contain any date for making the payment or the consequences that would follow if the payment is not made,” the agency quoted the sources as saying.

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