The single-member Justice A P Shah Committee has left it to the Government to decide any monetary compensation that needs to be paid by Reliance Industries Ltd for extracting the natural gas that migrated from ONGC’s adjacent fields.
While the Committee’s report finds that the Mukesh Ambani-promoted firm has received benefits by production of the migrated gas and these benefits need to be returned to the Government, the report said, “The Committee faced significant limitations in giving a figure to the final value of migrated gas produced by RIL during the term of its lease, due to the lack of data and the Committee’s inherent technical limitations.”
“While DeGoyler & MacNaughton's report has to form the basis for the migration of gas up till 2015, subsequent migration of gas post-2015 has to be inquired into by the Government of India,” the report added.
The Justice AP Shah Committee was constituted in December 2015 by the Ministry after American consultant DeGoyler and MacNaughton (D&M) in its findings said there was gas migration from ONGC’s east coast block adjancent to the producing asset belonging to RIL.
The Committee’s terms of reference were to look into the legal, financial and contractual provisions under the production sharing contract (PSC) and suggest a future course of action and also ‘quantify the unfair enrichment’ on account of gas migration.
After nearly 10 months of hearing the views of all parties, in an exhaustive 113 page report, the Committee said that RIL’s production of migrated gas and retention of the ensuing benefits amount to ‘unjust enrichment’ as its PSC did not allow the company to produce and sell migrated gas.
ONGC has no locus standi
The committee said that as per the PSC, RIL should have approached the government for an order on joint development. “Since RIL did not pursue such a step, and it had not been given the migrated gas as a gift or largesse, its actions had no lawful justification and amounted to unjust enrichment,” the report stated.
Further, the committee also stated that it is the Government of India and not ONGC that is entitled to claim compensation from RIL. “ONGC has no locus standi to bring a tortious claim against RIL for trespass/conversion since it does not have any ownership rights or possessory interest in natural gas,” the report said.
The Shah Committee also accepted accepted D&M’s findings that there was connectivity and continuity between RIL’s producing assets in the KG-D6 block or KG-DWN-98/3 and ONGC’s Godavari PML blocks and KG-DWN-98/2.
“Further as per the calculations contained in the report (D&M report), from April 1, 20119 (when gas production commenced from the KG-DWN-98/3 block) till March 31, 2015, 7.009 billion cubic metre and 4.116 billion cubic metre had migrated from the Godavari PML and D1 discovery of KG-DWN-98/2 block respect respectively to KG-DWN-98/3 block of which 5.968 billion cubic metre and 3.015 billion cubic metre was produced from Godavari PML and D1 discovery of KG-DWN-98/2 block respectively, through KG-DWN-98/3,” the Shah Committee report stated adding that it has also taken note of D&M’s forecasts regarding the gas migration.
Was connectivity of reservoirs known in 2003?
The Shah Committee has also recommended that allegations by both RIL and ONGC that both parties had prior knowledge of connectivity and continuity of reservoirs must be enquired further.
“…particular emphasis laid upon the failure of both parties to present the information they had to the Directorate General of Hydrocarbons (DGH) at the time they allegedly obtained the information,” the Committee said.
In fact, to avoid such instances in the future, the Shah Committee has suggested that the case is an opportunity for the Ministry of Petroleum and Natural Gas and DGH to review and strengthen the disclosure system. The Committee said that the disclosure system can include penalties for suppression of material information.
It suggested that the DGH should become more proactive in exercising its regulatory authority both in the form of better vigilance and acquiring more incisive technical skills.
Finally, the Shah Committee also came down heavily on ONGC for its lack of activity in the east coast blocks which were under scrutiny.
“The long periods of alleged inactivity on the part of ONGC in this case particularly must be examined further…even today, ONGC has hardly progressed beyond exploratory stage, and there is no commercial production in either of its blocks under consideration,” the report stated.