Delhi HC upholds govt claims in $1.7 billion gas dispute with RIL

"It is contended that the migrated gas alone was valued at about $1.5 billion as of June 30, 2016," the single judge order had noted

The Delhi High Court on Friday upheld the Centre’s claim that Reliance Industries Ltd (RIL) and its partners had siphoned off gas from Oil and Natural Gas Corporation’s (ONGC’s) block, which was adjacent to its own, in the Krishna-Godavari (KG) basin, off Andhra Pradesh coast.

 

In doing so, the Division Bench of the high court set aside a single-judge Bench order of 2023 upholding a ruling in 2018 by an international arbitral tribunal that had vindicated the RIL position. Justice Rekha Palli and Justice Saurabh Banerjee observed the arbitration award was “contrary to public policy”.

 

The consortium includes the UK-based BP Plc and Niko Resources of Canada. RIL did not comment on the matter till the time of going to press.

 

 

The Division Bench said not only did RIL “succeed in extraction of huge amounts of migrated gas belonging to the ONGC block but also was enriched from the profits thereof at the cost of causing losses to the public exchequer, moreover, since the commodity at hand was/is a vital natural resource belonging to the Union of India as a trustee, in the public interest of the people of this country”.

 

“Any private entity like RIL cannot be allowed to subsume it for its own benefit at the cost of taking the UOI for a ride by remaining silent, and that when it is against the letter and spirit of the PSC (Production Sharing Contract),” the order read.

 

In April 2000, the RIL-led consortium entered into a PSC with the Centre for the exploration and extraction of natural gas from the KG basin.

 

But in 2013, state-owned ONGC shot off a letter to the Directorate General of Hydrocarbons (DGH) claiming that gas pools in the blocks of RIL and ONGC were connected, and that RIL had been siphoning off huge amounts of gas from its block.

 

The Ministry of Petroleum and Natural Gas accused RIL and its partners of an “unjust enrichment of over $1.729 billion” by siphoning off gas from deposits they had no right to exploit.

 

It was then that ONGC filed a writ petition in the Delhi High Court. In it the petroleum ministry, DGH, and RIL were also made parties.

 

The petition was disposed of by the court, which directed the ministry to consider the upcoming report of the expert agency by the name DeGolyer & MacNaughton (D&M), a petroleum consulting company based in Dallas, Texas. The agency was to undertake an independent third-party study to verify the claimed continuity and migration of gas from the ONGC block to the Reliance block.

 

Later, on November 19, 2015, D&M said “the integrated analyses indicated connectivity and continuity of the reservoirs across the blocks operated by ONGC and RIL”. It validated the Centre’s stand.

 

The ministry also appointed a one-man committee of Justice A P Shah, former chief justice of the Delhi High Court, on December 15, 2015, to consider the D&M report of 2015 and to recommend a course of action in the light of the findings contained in the report.

 

Based upon the Shah Committee report, the ministry demanded $1.5 billion and $174 million in interest from RIL for “unjust enrichment” made by Reliance.

 

RIL then approached the three-member tribunal headed by Singapore-based arbitrator Lawrence Boo. The tribunal rejected the government’s contention and said the PSC did not prohibit the contractor from producing gas, irrespective of its source, as long as the producing wells were located inside the contract area.

 

The government then approached the Delhi High Court against this order.

 

When the single-judge Bench of the High Court ruled in favour of RIL, the Centre appealed before the Division Bench.

 

On September 14, 2023, the Division Bench sought a response from RIL and others on the Centre’s appeal.

 

Attorney-General (A-G) R Venkataramani and former A-G K K Venugopal, both appearing for the Centre, had told the Division Bench that RIL knew about the connectivity of their gas blocks with the adjoining gas blocks of ONGC as far back as 2003.