• Gas migration row between ONGC- Reliance: Government says Shah Panel can decide on compensation

    The petroleum ministry has told the Justice AP Shah committee on the migration of gas from ONGC-held gas blocks to adjacent fields of Reliance Industries that its remit includes deciding on possible compensation, if any, to the government as well over any “unfair enrichment”.

    That effectively rules out any other remedy under the production-sharing contract (PSC) or the possibility of fresh arbitration between Reliance Industries and the government, clearing the way for the single-member committee to issue its report on the matter by the end of July.

    The petroleum ministry’s June 7 communication to the panel, which is not in the public domain, came after Directorate General of Hydrocarbons (DGH) contended the government was the sole custodian of natural resources and compensation if any should go to the Centre rather than ONGC.

    Shah then issued an order regarding the matter. “The issue before it is the dispute between ONGC and RIL which includes the question of whether there exists a claim for unjust enrichment by ONGC against RIL,” Shah said in a May 9 ruling.

    “The committee clarified its mandate does not extend to considering claim, if any, between the government and RIL. If the government has any claim against RIL it can always resort to appropriate remedy under the production-sharing contract.” DGH’s submission had prompted the Shah panel to ask the government for its view. According to RIL, the intervention by DGH meant the matter needed to be enquired into afresh.

    “RIL believes that any claim made by government against it would need to be resolved in another forum and therefore disassociated from the committee in light of new claims by DGH,” Shah recorded in the May 9 order. Responding to the May 9 order, the petroleum ministry assured the committee on June 7 that the government is in fact included under the terms of reference (ToR).

    hese allow the panel to quantify enrichment, if any, to RILheld blocks and to “make good the loss to ONGC/government on account of such unfair enrichment to the contractor”. RIL also wrote to the petroleum ministry seeking fresh discussions on the subject.

    ONGC has sought compensation from RIL for what it says is the loss of more than 18 billion cubic metres (bcm) of gas that migrated from its Krishna-Godavari Basin fields as well as the gas left stranded due to allegedly poor reservoir management by RIL. It’s seeking the cost of the gas with 18% interest. RIL declined to comment on the matter.

    “It would be inappropriate to comment on the submission itself in deference to Justice Shah’s instructions to the parties to maintain strict confidentiality,” the company said in an email to ET. “We have already made our detailed submission to the Hon’ble Shah Committee regarding the filing made by (Canadian partner) Niko.”

    ONGC’S COMPENSATION CLAIM ONGC has submitted a breakup of its compensation claim to the panel, ET has learnt: “RIL should be asked to compensate the state explorer for 9.476 bcm of gas that RIL has already produced, 1.435 bcm of estimated gas production from 2016 to 2019, and 7.3359 bcm of gas on account of poor reservoir management.”

    The state-owned company stayed away from the ToR debate and on July 8, in a fresh communication to the Shah panel, reiterated its claims. RIL had initially boycotted the Shah panel proceedings before reversing its stand in February. The panel was established last year.

    “It is RIL’s position the committee has no power to adjudicate any matters or issues concerning the claims of ONGC and any such recommendation of the committee, if made, would in no manner be binding on RIL,” the company had said in February. “Nothing in the D&M report points towards any wrongdoing by RIL.”

    The reference is to the November 2015 report by US-based consultant DeGolyer and MacNaughton (D&M) that said about 12 bcm of ONGC’s gas had migrated to RIL’s fields.

    The Shah committee is examining the findings of this report. The questions before the panel to be decided upon are acts of “omissions and commission on the part of all stakeholders, undue enrichment to block KGDWN-98/3 (held by RIL), and compensation, if any, to be paid to ONGC/government”.

    In its submission to the panel, ONGC said RIL and the regulator had known about the fields being connected more than a decade ago.

    “RIL and DGH had full prior knowledge of continuity and connectivity of Pliocene channels of all the blocks in question, and that there were acts of omission on the part of RIL right from 2002,” ONGC told the panel, ET has learnt.

    “DGH as regulatory authority should have initiated timely discussions/actions under PSC (production-sharing contract), P&NG (petroleum and natural gas) rules.”

    ONGC subsequently submitted another appraisal report prepared by D&M in 2003 that was included in Niko’s annual disclosure to the Canadian Stock Exchange, which said, “A portion of the field accumulation straddles the western boundary of the block (ONGC)”.

    Further, the state explorer told the panel that RIL and Niko Resources had prior knowledge that their development plan for exploration in KG Basin will deplete gas reserves in ONGC’s block.

    However, RIL is believed to have rejected this and told the Shah committee that the report reflected a “simplistic consideration of seismic data and very limited well data confined to discover wells in Block KG-DWN-98/3 (Block KG-D6), with no modelling but rather with a reliance on D&M’s general experience in geology”.

    ONGC would have had access to this information and could have raised the matter with RIL or DGH at the time rather than 10 years later, RIL said in its communication.

    “Up until this point in time, ONGC had yet to drill wells and discover any hydrocarbon in this area,” RIL told the committee. “As RIL has explained to the committee, seismic data may suggest continuity of channels across block boundaries, but is entirely insufficient in conclusively establishing presence of reservoir and reservoir connectivity.” Cincinnati Bengals Womens Jersey

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