The government has ordered Reliance Industries (RIL) to pay a penalty over an arbitration award on its Panna Mukta and Tapti (PMT) oil field, the company has informed BSE in a statement on Tuesday. The company, however, said the notice was premature.
"RIL as part of the contractor for Panna Mukta and Tapti production sharing contracts, has been notified by [the] Government of India (GOI) of its computation of the purported share of GOI's Profit Petroleum and Royalty alleged to be payable by the contractor pursuant to the GOI's interpretation of Arbitration Tribunal's final partial award dated 12 October 2016," RIL said in its statement to BSE.
"Government's demand notice is premature. 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," it adds further.
The company said the tribunal is yet to schedule the timeline for the quantification phase. RIL has already responded to the government's demand notice appropriately, it said. Further, RIL has already challenged the partial award before the English courts and the matters are, as such, sub-judice.
An RIL executive said the amount was still to be decided by the arbitration court though media reports quoted a figure of $3 billion as penalties. RIL and Shell hold 30 per cent stake each in PMT fields while the remaining is with state-owned Oil and Natural Gas Corp (ONGC).
In October 2016, a London-Based arbitration plan ruled in favour of the Centre on recovery cost from RIL and BG Group (now part of Shell) for the PMT oilfields. This was an interim award and final arbitration award was to follow procedural hearings. RIL had appealed against the partial award in the British courts.
The legal tussle started in 2010 with RIL and BG Exploration and Production India referred a number of disputes, differences and claims arising under two Production Sharing Contracts entered into in 1994 to arbitration against the government. In 2012, the arbitration tribunal passed a number of final partial awards, largely in RIL's favour. This was followed by the Centre challenging the Tribunal's awards before the Delhi High Court. The Supreme Court, however, allowed for arbitration to be carried out in the British courts.
The disputes over the PMT block relate to, among other things, the limits of cost recovery, profit sharing and audit and accounting provisions of the PSCs. The value of the claim made by RIL and others exceeded $500 million, according to RIL's 2016 annual report.
Even as RIL fights over claims in this oil field, the regulatory issues have not stopped the company from making future investments in upstream facilities in India. In June, the company in partnership with BP Plc announced it will invest Rs 40,000 crore in the Krishna-Godavari block in the next three to five years.