Government slaps RIL, partners with $1.55-bn penalty

The ONGC-operated hydrocarbon blocks KG-DWN-98/2 and the Godavari PML (Production Mining Lease) shared a common boundary with KG-DWN-98/3 operated by RIL-BP-Niko on the KG-D6 basin.

By: ENS Economic Bureau | New Delhi | Updated: November 5, 2016 4:07 am
Reliance, Reliance Industries Ltd, RIL, Reliance penalty, BP penalty, Niko penalty, ONGC, Krishna-Godavari basin, india news The government has given RIL, BP and Niko 30 days to respond to its November 3 letter.

THE government has slapped a $1.55-billion penalty on Reliance Industries Ltd (RIL) and its partners BP and Niko for producing gas out of state-owned ONGC’s share in the Krishna-Godavari basin. The ONGC-operated hydrocarbon blocks KG-DWN-98/2 and the Godavari PML (Production Mining Lease) shared a common boundary with KG-DWN-98/3 operated by RIL-BP-Niko on the KG-D6 basin.


The claim by the Ministry of Petroleum and Natural Gas is based on the recommendations of the AP Shah committee that confirmed migration of gas from the ONGC block to the RIL-operated block. In a late-evening statement, RIL said the government’s claim was based on a misreading and misinterpretation of the production sharing contract.

The government has given RIL, BP and Niko 30 days to respond to its November 3 letter. “RIL proposes to invoke the dispute resolution mechanism in the PSC and issue a Notice of Arbitration to the Government. RIL remains convinced of being able to fully justify and vindicate its position that the Government’s claim is not sustainable,” the company said. RIL owns 60% in the block KG-DWN-98/3, with BP and Niko holding 30% and 10%, respectively.

The government had set up the Shah committee further to a report submitted by D&M, a US-based consultant offering reservoir appraisal and field development planning services, which undertook an independent third party study following its agreement with RIL and ONGC. The study was coordinated by Directorate General of Hydrocarbons. D&M, in its report, indicated connectivity and continuity of reservoirs and also quantified the volume of gas migrated.

The Shah committee which also looked at the D&M report concluded that RIL’s production of migrated gas and retention of benefits gained from that amounted to unjust enrichment. Further, the committee noted that it was for the government and not ONGC to claim restitution (restoration of something lost or stolen to its proper owner). It was for the government to decide the quantum of migration, the committee said.

According to RIL, it worked within the boundaries of the block awarded to it in carrying out petroleum activity and “has complied with all applicable regulations and provisions of the Production Sharing Contract… The liability of the contractor has not been established by any process known to law and the quantification of the purported claim is without any basis and arbitrary.”

RIL contended that the contractor is restricted to producing only that quantity of hydrocarbon as existed at the point in time when the PSC was signed according to the government. “This approach overlooks the fundamental fact that at that stage the work of exploration of the block has not even commenced and a complete lack of data makes it impossible to estimate the quantity of hydrocarbons available in the block,” it said in the statement.


July 22, 2013: ONGC wrote to DGH pointing to continuity of its and RIL gas pools

July 3, 2104: RIL-ONGC agree to appoint D&M to undertake independent study

November 30, 2015: D&M points to connectivity of ONGC & RIL blocks

December 15, 2015: Ministry sets up one-man AP Shah committee

* Shah committee submits report on August 31, 2016; finds RIL benefited from ‘unjust enrichment’, asks govt to quantify migration, says restitution can be claimed by govt

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  1. T
    Nov 5, 2016 at 7:41 am
    Now Ambani will be the broker for all defense Purchases. All foreign suppliers will have joint venture with Ambani. One fighter plane which may cost 200 Cr will cost 700 Cr. with Ambani value addition like the Rafale fighters from France. What product has Ambani made which he has added value by research or technology. His value addition has been in terms of brokering because of political clout and control of Judges and Bureaucracy through bribes. Now all foreign companies knows that you can get deals done in India through only Ambani as he controls everything including all political parties including BJP, Congress, Samajwadi etc. , media whether directly owned like TV18 or indirectly owned like NDTV , Times Now etc.
    1. M
      Nov 5, 2016 at 5:16 am
      RIL, partners will not be pay back $1.55 billion to GOI treasury under feku Govt.
      1. I
        Nov 5, 2016 at 1:10 am
        Despite having monopoly over Oil and Gas sector since the past decade, RIL has failed to be a Global Oil and Gas company like Exxon Mobil, Chevron. Chinese Oil companies have grown tremendously in the past few years and have exceeded global oil majors.
        1. N
          Niladrinath Mohanty
          Nov 5, 2016 at 3:35 am
          Yesterday I watched a TV interview of Arvind Kejriwal where he claimed that Narendra Modi is owned By Mukesh Ambani and Adani and today this news!
          1. Sanjeev Singal
            Nov 5, 2016 at 3:25 pm
            Why not FIR?
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