Judicial panel to probe gas row

Commission will consider the report of the international consultant, D&M, and recommend the action to be taken by the government

The government has set up a judicial commission headed by a former chief justice of the Delhi High Court, Ajit Prakash Shah, to look into the findings of the international consultant DeGolyer & MacNaughton in the gas dispute between Reliance Industries (RIL) and state-owned Oil and Natural Gas Corporation (ONGC).

“The judicial commission will look at acts of omission and commission of all the parties involved, including RIL, ONGC, the Directorate General of Hydrocarbons and the government,” an oil ministry official told Business Standard.

“If gas has migrated from ONGC’s blocks to RIL’s block, it is important to understand the role of all the other parties,” an oil ministry official said.

The consultant had said 11 billion cubic meter of gas may have flown from ONGC’s Godavari PML and KG-D5 blocks to RIL’s KG-D6 block in the Krishna-Godavari basin off the Andhra Pradesh coast. While D&M did not delve into the financial value of the gas migration, the volume of gas belonging to ONGC works out to around $1.7 billion (about Rs 11,300 crore) at a gas price of $4.2 per million British thermal units. The single-member commission has been asked to consider the report of the international consultant and recommend action to be taken by the government considering the legal, financial and contractual provisions, including those contained in the Oilfield Regulations and Development Act, the Petroleum and Natural Gas Rules, and the relevant production sharing contracts. The official said the commission would also quantify any “unfair enrichment” that might have happened to the contractors of the KG-D6 block and measures to prevent further unfair enrichment on account of gas migration. The commission will also recommend action to be taken to make good the loss to ONGC or government on account of such unfair enrichment.

The block, KG-DWN 98/2 (or KG-D5), has been operated by ONGC since 2005. While KG-D6 is under production since 2009, the field development plan for the block KG-DWN-98/2 is yet to be approved. The official said the commission would have the freedom to formulate its own procedure and call for any records or examine any witness while the petroleum ministry would provide the necessary administrative support. The commission has been asked to submit its report in three months.

Justice Shah had also chaired a high-level committee to look into the applicability of the minimum alternate tax on capital gains made by foreign institutional investors. That panel’s recommendations were accepted by the government in September.

Texas-based D&M had earlier this month submitted its final report on the natural gas row between the two oil companies to the government, establishing gas reservoirs belonging to the two companies in the KG basin were continuous. It said RIL had already produced 317 billion cubic feet of the 393 billion cubic feet of gas that had migrated from ONGC’s blocks. ONGC had approached the Delhi High Court in April, alleging gas migration from its blocks to RIL’s block. The court had asked the company to give the government six months time ending June 1, 2016, to act on the consultant’s report.