The Centre issued a $1.55 billion claim from Reliance Industries and its partners for drawing natural gas belonging to state-owned ONGC in the KG Basin over the last seven years.
The claim is in line with the recommendations of the one-man AP Shah committee set up to look into the matter. The committee's report recommended that RIL pay the government compensation for extracting natural gas that had flowed from ONGC’s portion of the field to RIL’s side.
RIL has said it would seek arbitration under the terms set out in the production-sharing contract.
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Without precedent
“The claim of the Government is based on misreading and misinterpretation of key elements of the PSC (production sharing contract) and is without precedent in the oil & gas industry, anywhere in the world,” according to a statement from RIL.
“According to the government the contractor is restricted to producing only that quantity of hydrocarbon as they existed at the point in time when the PSC was signed,” the statement added. “This approach overlooks the fundamental fact that at that stage the work of exploration of the block has not even commenced and a complete lack of data makes it impossible to estimate the quantity of hydrocarbons available in the block.”
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RIL added that the quantification of the amount to be paid was “without any basis and arbitrary” and was not based on any law.
“RIL proposes to invoke the dispute resolution mechanism in the PSC and issue a Notice of Arbitration to the Government,” the company statement said.