The government has slapped notices on Reliance Industries (RIL) and its foreign partners – UK’s BP and Canada’s Niko Resources...
The government has slapped notices on Reliance Industries (RIL) and its foreign partners – UK’s BP and Canada’s Niko Resources– seeking to recoverfrom them $1.55 billion in the aggregate, for exploiting natural gas that migrated to their KG-D6 block from state-run ONGC’s adjacent asset.
The move followed computation of the unjust benefit accrued to the firms by Directorate General of Hydrocarbons, and just that; no penalty is levied on the RIL consortium for any act of commission.The petroleum ministry, in a three-page letter sent to the firms on November 3 with details of how the amount has been computed, “directed” the explorers to pay the amount in next 30 days, failing which “(the) ministry shall be constrained to take steps for recovering (the) unpaid government dues.”
In addition, RIL and its partners have also been asked to pay additional profit petroleum of $175 million corresponding to the production of the migrated gas.The letter sent by the government to Ajay Khandelwal of RIL, Sashi Mukundan of BP and Larry Fisher of Niko Resources said that the quantum of migrated gas from ONGC’s block sold by them is 338.332 million mBtu till March 31, 2016.
The worth of this migrated gas is the “unjust benefit” received by them. “…the amount of restitution receivable by government from you as on March 31, 2016 is $1.473 billion (gross).
After deducting the royalty paid by you amounting to $71.714 million and adding interest of $149.863 million at LIBOR plus 2% calculated upto March 31, 2016, the government is entitled to receive an amount of $1.552 billion towards restitution of the unjust benefit,” read the letter, a copy of which was reviewed by FE.
Commenting on the issue, a BP spokesperson said, ““We have received a letter from the Government on the issue of migration of gas from the neighboring block. We believe resolution of such geological boundary disputes should be based on well-established international petroleum industry practices and in line with the PSC.” RIL did not respond to a FE query till the time of going to press. RIL scrip closed at Rs 1005.8, 1.92% on the BSE on Friday.
The government’s move comes after a report by A P Shah, former chief justice of Delhi High court, presented to it on August 29, in which he agreed with the findings of US-based consultant DeGolyer and MacNaughton (D&M) on the issue of gas migration.
The consultant in a November 2015 report had highlighted that as much as 11.122 billion cubic metres of natural gas had migrated from ONGC’s 98/2 area to RIL consortium’sadjoining KG-D6 block in the Bay of Bengal between April 1, 2009 and March 31, 2015. The Shah panel had said that the question of quantification of unfair enrichment is to be decided by the government, with the principle that whatever benefit RIL consortium received in terms of the migrated gas is liable to be returned to the Centre.
The Shah panel had said that the question of quantification of unfair enrichment is to be decided by the government, with the principle that whatever benefit RIL consortium received in terms of the migrated gas is liable to be returned to the Centre. It however added that ONGC can’t make any tortuous claim against RIL and partners.