Singapore-based arbitrator to preside over RIL-ONGC dispute

By: | Published: February 8, 2017 8:00 PM

Normally, it can take up to an year for the full panel to be constituted.

The full arbitration panel was constituted in less than three months of RIL-BP-Niko slapping an arbitration notice on November 11 last year, thereby showing intent of quickly resolving the sticky issue, he said. (Image source: Reuters)The full arbitration panel was constituted in less than three months of RIL-BP-Niko slapping an arbitration notice on November 11 last year, thereby showing intent of quickly resolving the sticky issue, he said.
(Image source: Reuters)

Singapore-based arbitrator Prof Lawrence Boo has been named as the presiding judge of a three- member arbitration panel that will go into the validity of government’s demand of USD 1.55 billion compensation from Reliance Industries for “unfairly” producing ONGC’s gas.

Government of India has named former Supreme Court Judge G S Singhvi as its nominee on the three-member arbitration panel, while RIL and its partners BP plc of UK and Canada’s Niko Resources have named former UK High Court Judge Bernard Eder to the panel.

“The two arbitrators (appointed by Government and RIL-BP) have agreed on Boo as the third/presiding arbitrator,” a senior Oil Ministry official said. “The Arbitral Tribunal is fully constituted now.”

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The full arbitration panel was constituted in less than three months of RIL-BP-Niko slapping an arbitration notice on November 11 last year, thereby showing intent of quickly resolving the sticky issue, he said.

Normally, it can take up to an year for the full panel to be constituted.

The Oil Ministry had on November 3 last year issued a notice to RIL, Niko and UK’s BP Plc seeking USD 1.47 billion for producing in the seven years ended March 31, 2016 about 338.332 million British thermal units of gas that had seeped or migrated from the state-owned Oil and Natural Gas Corporation’s (ONGC) blocks into their adjoining KG-D6 in the Bay of Bengal.

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 is the operator of the KG-D6 block with 60 per cent interest while BP holds 30 per cent. The remaining 10 per cent is with Niko Resources.

The official said the arbitration will now get underway.

The government’s compensation claim flowed from the report of the Justice (retd) A P Shah Committee.

The Shah panel, in its August 28, 2016 report, concluded that there has been “unjust enrichment” to the contractor of the block KG-DWN-98/3 (KG-D6) due to production of the migrated gas from ONGC’s blocks KG-DWN-98/2 and Godavari PML.

The government, the official said, accepted the recommendations of the committee and consequently, decided to claim restitution from RIL-BP-Niko for “the unjust benefit received and unfairly retained”.

So, a notice was sent, he said, adding that the government is also pressing RIL to pay USD 174.9 million of additional profit petroleum after certain costs were disallowed because of KG-D6 output being lower than targets.

The cost recovery issue is also being arbitrated separately.

Originally, ONGC had sued RIL for producing gas that had migrated from its blocks KG-DWN-98/2 (KG-D5) and Godavari PML in the KG basin to adjoining KG-D6 block of RIL.

Under direction of the Delhi High Court, the government had appointed a one-man committee under retired Justice A P Shah to go into the issue. Shah however said the compensation should go to government as it is the owner of all unproduced natural resources.

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