The government has asked Reliance Industries and its partners in the KG-D6 block to pay $1.55 billion (about ₹10,350 crore) as compensation for benefits derived from the natural gas that flowed from ONGC’s adjacent fields in the Krishna-Godavari Basin, off the Andhra Pradesh coast.
Based on the recommendations and model suggested by the single-member Justice AP Shah Committee, the government has made a claim against the contractors, RIL-BP-Niko, for gas said to have flowed from the neighbouring blocks.
In response to the notice, RIL, headed by Mukesh Ambani, said it proposes to invoke the dispute-resolution mechanism in the Production Sharing Contract and issue a Notice of Arbitration to the government. In a statement, the company said “the Contractor has worked within the boundaries of the block awarded to it and has complied with all applicable regulations and provisions of the PSC.”
When the news broke, the RIL stock, which opened at ₹1,021, hit an intraday low of ₹1,000 before closing at ₹1,005, still down 1.92 per cent on the BSE.
Sources said that the Directorate-General of Hydrocarbons (DGH) has derived the $1.55-billion compensation figure after deducting net royalty that the contractors have paid the government and recasting the accounts to factor in profit petroleum for 2015-16 ($173 million). The figures have been derived based on calculations in respect of gas price and volume, on a monthly basis.
Confirming the continuity of reservoirs, the Shah Committee had said that independent consultant DeGoyler & MacNaughton’s report must form the basis for the migration of gas up till 2015.
The American consultant’s report had quantified the amount of gas that flowed from the Godavari PML and D1 discovery area of ONGC’s KG-DWN-98/2 to RIL’s Block (KG D6) from April 2009 to March 2015. It also quantified the amount of gas likely to flow from April 2015 to March 2019. The report found that up to 15 per cent of the gas could belong to ONGC.