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BG-led consortium causes $5.6-bn output loss at PMT fields: OilMin

BG-led consortium causes $5.6-bn output loss at PMT fields: OilMin
The Oil Ministry has informed the Prime Minister's Office (PMO) that a consortium-led by BG Group had caused a production loss of $5.6 billion in western offshore Panna/Mukta and Tapti oil & gas fields by not completing committed work programme.

In a status report on the arbitrations relating to the PMT field, Oil Ministry on December 2 wrote to PMO that it is trying in all possible ways to protect government's interest by strengthening the legal team, hiring of expert witnesses and moving to Supreme Court for filing curative petition.

Sources said  that the ministry told PMO that BG and its partners Reliance Industries and ONGC, had initiated arbitration on the issue related to cost recovery limit prescribed in the Production Sharing Contract (PSC), calculation of royalty on gas production and government audit issues. The ministry said the total profit petroleum earned by the contractors from the PMT fields was $11.05 billion. Of this, BG Group and Reliance Industries, which hold 30 per cent stake each, got $3.32 billion. State-owned Oil and Natural Gas Corporation (ONGC), which holds the remaining 40 per cent interest, 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.

The ministry accused the three partners of not completing the committed work programme, 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.

Sources said the ministry told PMO that the contractors have also used the clause related to notional income tax in the PSC in a manner so as to benefit themselves "unjustly".

They are using notional tax rate of 50 per cent for calculation of profit petroleum from the block while using the applicable tax rate in paying the income tax to the government, they said. 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. The PMT arbitration is separate from the ones RIL has initiated over relinquishment of four blocks and gas dispute in KG-D6 block.

The company is disputing the amount it has to pay as liquidated damages for four relinquished blocks — KG-OSN-97/3, KG-OSN-97/4, MB-OSN-97/1 and GK-OSN-97/1. 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, RIL and its partners BP plc and Niko Resources of Canada have disputed disallowing of cost. Also, a separate arbitration has been filed over delay in announcing a gas price hike, they said. 
PTI

PTI

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