UK-based BP, which partners Reliance Industries (RIL) in the KG basin deepwater block —KG-DWN-98/3, wants the Indian partner to resolve amicably the multiple arbitrations...
UK-based BP, which partners Reliance Industries (RIL) in the KG basin deepwater block —KG-DWN-98/3, wants the Indian partner to resolve amicably the multiple arbitrations it has launched against the government. Officials privy to developments told FE that the global energy giant is trying to persuade the Mukesh Ambani-led firm not to go ahead with the long drawn legal process, which could hurt the business operations and might not yield any wholesome results.
Currently, there are four arbitrations where RIL is fighting with the government. Of these, three are related to KG-D6 block, where BP is directly involved. In 2011, BP decided to buy 30% stake in RIL’s 23 oil and gas blocks in India for a whopping $7.2 billion.
“The key is to resolve these (disputes) with the objective of delivering mutual value. Be it through a focused discussion or a lawful engagement, we aim to work with governments in a transparent manner to deliver this value. In India too, we remain committed to this end objective of delivering mutual value – for the country and its citizens; and for BP,” a spokesperson for BP told FE.
Recently, BP decided to participate in the A P Shah panel, while the RIL is staying out of it. Shah, former chief justice of Delhi High Court, has been appointed by the petroleum ministry to study the findings of US-based consultant DeGolyer and MacNaughton (D&M) and recommend future course of action where it is alleged that RIL has taken out gas from its adjacent area that belongs to ONGC.
BP is one of the world’s leading international oil and gas companies. Operating in almost 80 countries with total group oil and gas production of over 3 million barrels of oil equivalent per day and refining throughput of 1.7 million barrels per day, it is but natural occasionally to face issues in our businesses, feels the company.
The government has withheld $2.5 billion of payments to RIL so far on the grounds that it had invested way too much in relation to the amount of gas that was in the grounds in the KG D6 block. RIL, however, argues that costs incurred are not related to the amount of gas in the field but on the basis of the estimated reserves — according to RIL, under the cost-recovery formula in place, it has to be compensated for its investments.
In the east coast block, while RIL’s initial estimate of gas was 7 tcf (198.2 bcm) and recoverable reserves at 5.6 tcf, it had hiked this to 12 tcf with recoverable reserves of 10-11 tcf. In 2012, however, RIL dramatically reduced its estimate of recoverable gas to 2.9 tcf — at that point, it was charged that RIL was hoarding gas till such time the government doubled prices.
The current output at KG D6 hovers around 9.5 million metric standard cubic metre per day (mmscmd), a far cry from the peak of nearly 60 mmscmd achieved in early 2010.