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KG-Basin gas migration penalty: Reliance serves arbitration notice on govt
With an arbitration notice from Reliance Industries Ltd (RIL) — coupled with having to handle ONGC officers who erred during a period prior to his regime — Petroleum Minister Dharmendra Pradhan finds himself in a bind. Contesting the Centre’s compensation notice of $1.55 billion for migrated gas that flowed from ONGC’s adjacent fields in the Krishna-Godavari Basin during the weekend, RIL and its partners have sent an arbitration notice.
Based on the recommendations of the Justice AP Shah Committee, the Centre has made a claim against RIL-BP-Niko for gas said to have flown from the neighbouring blocks. Sources told BusinessLine RIL and its partners in the KG-D6 block have sent a notice to the Centre on the grounds that the compensation claim is based on misinterpretation of key elements of the production sharing contract (PSC), and is without precedent in the global oil and gas industry.
While government and RIL officials remained non-committal on the arbitration notice, sources associated with the developments said: “The contractors are within their rights to opt for arbitration as per the PSC, but, it does not close the dialogue process between the government and the contractors. While the issue can be challenged, work on further development of the fields can simultaneously continue.”
A tougher challenge for the Centre is how to fix accountability of those in ONGC and the Directorate General of Hydrocarbon (DGH), who were supposedly in the know on the gas migration, which is being contested now. Pradhan had, on November 10, said he is bound by the law. The Shah panel had also pulled up ONGC for not making proper disclosure when it first came to know about the gas migration. “It is not easy, as the period involved is six-seven years back.
How do you fix responsibilities for those who have already retired? None of the current set-up of ONGC or DGH is involved,” pointed out another official. “Whatever action is taken, it has to be ensured that the current set-up is not demotivated.” Confirming the continuity of reservoirs, the Shah committee had said US-based independent consultant DeGoyler & MacNaughton’s report must form the basis for the migration of gas till 2015. Ryan Murray Authentic Jersey
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