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KG-D6 gas controversy: Penalty on Reliance Industries to be fixed by DGH

On the heels of the AP Shah panel’s confirmation of “unjust enrichment” of Reliance Industries (RIL) from gas migrated from ONGC’s acreage adjacent to the private company’s KG-D6 block, the petroleum ministry has tasked its technical arm, the Directorate General of Hydrocarbons (DGH), to calculate the penalty on RIL.

By: | New Delhi | Updated: September 23, 2016 6:55 AM
ONGC and DGH argued that the quantification of unfair enrichment has to be based on the monetary value of the migrated gas produced by RIL. (Reuters) ONGC and DGH argued that the quantification of unfair enrichment has to be based on the monetary value of the migrated gas produced by RIL. (Reuters)

On the heels of the AP Shah panel’s confirmation of “unjust enrichment” of Reliance Industries (RIL) from gas migrated from ONGC’s acreage adjacent to the private company’s KG-D6 block, the petroleum ministry has tasked its technical arm, the Directorate General of Hydrocarbons (DGH), to calculate the penalty on RIL. Though the panel had said the question of quantification of unfair enrichment needed to decided by the government, it added that ONGC lacked locus standi to bring a “tortious claim” against RIL.

Petroleum minister Dharmendra Pradhan reiterated on Wednesday that his government would take the final decision on the issue by September 30.

ONGC was first to bring up the issue that RIL has been pumping out gas from its KG-DWN-98/2 block in the Krishna-Godavari Basin. RIL owns the adjacent block, KG-DWN-98/3.

Shah, a former chief justice of the Delhi High court, in his report said that the quantification of unjust enrichment can either be based on the monetary value of the migrated gas produced, and to be produced, by RIL or it can be the profits earned by RIL, after taking into account its costs and sales figures.

ONGC and DGH argued that the quantification of unfair enrichment has to be based on the monetary value of the migrated gas produced by RIL.

Conversely, RIL argued that it is entitled to recover the development, drilling and facilities costs (capital expenditure) and operating costs for the migrated gas and take into account its sales figures.

A November 2015 study by US-based consultant DeGolyer and MacNaughton said that as much as 11.122 billion cubic metres of natural gas had migrated from ONGC’s 98/2 area to the adjoining KG-D6 block of RIL in the Bay of Bengal between April 1, 2009, and March 31, 2015, which the Ambani firm commercially exploited. Unconfirmed reports peg the value of natural gas taken out by RIL at Rs 11,000 crore.

Citing reasons for not arriving at a penalty figure, the Shah panel said that it faced significant limitations in giving a figure to the final value of the migrated gas produced by RIL during the term of its lease due to the lack of data and the committee’s inherent technical limitations.

7.009 bcm of gas from ONGC’s Godavari PML & 4.116 bcm from 98/2, migrated to RIL’s KG-D6

l Of this, RIL drilled out 5.968 bcm from Godavari and 3.015 bcm from 98/2

l Shah panel leaves quantification of RIL’s unfair enrichment to govt, but says ONGC cannot have a tortious claim on RIL

RIL says it is entitled to recover the development and operating costs

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