Status report on RIL arbitrations sent to PMO
RIL and its partners have four arbitration cases with the Centre, of which two pertain to the KG-D6 block on cost recovery and market pricing
The ministry of petroleum & natural Gas has given a status report on Reliance Industries Ltd (RIL)’s arbitration cases to the Prime Minister’s Office. In the report, it said there was a $5.6-billion production loss from the Panna, Mukta and Tapti (PMT) fields.
RIL and its partners have four arbitration cases with the Centre, of which two pertain to the KG-D6 block (on cost recovery and market pricing).
In its status report, the ministry said the total profit petroleum earned by the contractors from the PMT fields was $11.05 billion.
Of this, British Gas and RIL got $3.32 billion, while Oil & Natural Gas Corporation got $4.42 billion. The government’s share was $1.3 billion. Besides, the government also earned $590 million as royalty and $472 million as cess from these fields.
According to the ministry, the three contractors haven’t completed the committed work programme in the blocks, which has resulted in a production loss for the government. The loss is estimated at $3.7 billion in Panna-Mukta and $1.9 billion in the Tapti production-sharing contract.
In 2010, RIL and British Gas had invoked arbitration for PMT, primarily on the production-sharing contractor provision capping the development cost to the cost recovery limit. Besides, there are issues relating to royalty, cess, service tax and the scope of audit by the Comptroller and Auditor General of India. RIL is also involved in arbitration for four relinquished blocks — KG-OSN-97/3, KG-OSN-97/4, MB-OSN-97/1 and GK-OSN-97/1. In this case, the company is disputing the amount it has to pay as liquidated damages. Though it had paid $800,427 in June 2011, the company had, subsequently, invoked arbitration.
Arbitrations relating to the PMT fields and the relinquished blocks are due for hearing in April next year.
In the arbitration cases relating to KG-D6, the proceedings are yet to begin, with the appointment of arbitrators being delayed for long. In May 2010, RIL had invoked an arbitration clause against the government for disallowing about $1 billion on account of under-utilisation of the facilities created and under-production of natural gas.
Another arbitration notification for KG-D6, on the deferment of gas pricing guidelines, was filed in May this year.