Govt imposes $1.55 bn demand on RIL-BP-Niko

Govt imposes $1.55 bn demand on RIL-BP-Niko

PTIUpdated: Thursday, May 30, 2019, 11:34 AM IST
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New Delhi : Government has slapped a USD 1.55 billion demand on Reliance Industries and its partners BP and Niko for “unfairly enriching” by producing natural gas belonging to state-owned ONGC, a move that is most likely to land in arbitration, reports PTI.

The oil ministry on November 3 issued a notice to all the three partners seeking USD 1.47 billion for producing 338.332 million British thermal unit in seven years ended March 2016. After deducting USD 71.71 million royalty paid on the gas produced and adding an interest at the rate of Libor plus 2 per cent totaling USD 149.86 million, a total demand of USD 1.55 billion was made on RIL, BP and Niko.

Originally, ONGC had sought suing RIL and seeking compensation for the gas that had migrated from its blocks KG-DWN-98/2 (KG-D5) and Godavari PML in the KG basin in the Bay of Bengal to neighbouring KG-DWN-98/3 (KG-D6) block of RIL and produced by the private company.

The government had appointed a one-man committee under retired Justice A P Shah to go into the issue. The panel in its report on August 29 felt that the government and not ONGC is entitled to compensation.Subsequently, the ministry asked its upstream technical arm DGH to calculate the amount of compensation and a demand notice has now been slapped on RIL-BP-Niko.

 “The committee has concluded that the contractor’s (RIL- BP-Niko) production of migrated gas and retention of ensuing benefits amounts to unjust enrichment, since the production sharing contract (PSC)… does not permit a contractor to produce and sell migrated gas,” the demand note said.

The ministry said it had accepted the Shah committee report and consequently “it has been decided by the government to claim restitution from the contractor of the block KG-DWN- 98/3 for the unjust benefit received and unfairly retained by them”.

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