Govt to move HC against tribunal order on RIL gas dispute: Pradhan

Verdict went in favour of RIL even after a report by US-based DeGolyer and MacNaughton said 11.122 bn cubic metres of gas had migrated from ONGC's area to RIL's block between April 2009 and March 2015

Petroleum minister Dharmendra Pradhan said on Friday that the government will appeal at the High Court against an order by an international tribunal favouring Reliance Industries in the controversial gas migration dispute.

“The government will certainly file an appeal against the arbitration award in the higher forum. It will be in the High Court,” Pradhan told the media on the sidelines of a Confederation of Indian Industry (CII) in Delhi. Government is set to move the Delhi High Court after a three-member tribunal — including Singapore-based arbitration chambers' head Lawrence Boo, government representative and former Supreme Court Judge G S Singhvi and RIL arbitrator former English High Court Justice Bernard Eder — rejected the claims by government of illegal production of gas by the Mukesh Ambani-led company and its partners from neighbouring block of state-run Oil and Natural Gas Corporation (ONGC) in KG basin. RIL had initiated arbitration after the government slapped a penalty of $1.55 billion on the company for allegedly producing migrated gas.

Stating that there is no ‘unjust enrichment’ of gas by RIL, the panel highlighted that based on the production sharing contract, the consortium is entitled to retain all benefits, including cost and profit petroleum, from the production. The order was passed, with a dissent note from government representative Singhvi.  

The verdict went in favour of RIL, even after a report by the US-based consultant DeGolyer and MacNaughton (D&M) submitted in November 2015 stated that 11.122 billion cubic metres of natural gas had migrated from ONGC’s area to RIL's block from April 2009 to March 2015. RIL had made its discoveries in the block KG-DWN-98/3, way back in 2002 and started commercial production on April 1, 2009. The dispute came to the fore in July 2013, when ONGC wrote to the Directorate General of Hydrocarbons stating that there was evidence of lateral continuity of gas pools of the ONGC blocks with that of RIL.

Later in August 2016, a single-member panel headed by justice A P Shah had submitted a report stating that RIL and its partners got “unjust” benefits from the migration of gas. However, it said the compensation should be paid to government as it is the owner of any unproduced gas.

Interestingly, the order comes at a time when ONGC’s overseas arm ONGC Videsh (OVL) is at the receiving end in a similar case in Russia. Russian oil giant Rosneft has filed a $1.4 billion suit against OVL, ExxonMobil and a Japanese consortium that together control 30 per cent in Sakhalin-I project, for allegedly producing from the nearby block Chavyo North that the Russian company had acquired in 2012. Interestingly, Rosneft itself owns around 20 per cent stake in Sakhalin-I.  OVL had acquired 20 per cent stake in the project way back in 2001 for about $170 billion. The ONGC arm has so far invested around $1.5 billion in the project, according to a Reuters report. Rosneft is claiming about $272 million from OVL.