Govt tells RIL, Shell, ONGC to pay $3 billion for Panna-Mukta-Tapti
The government has sought about $3 billion from Reliance Industries, Royal Dutch Shell and ONGC following a "partial" arbitration award in its favour over cost recovery in Panna/Mukta and Tapti (PMT) oil and gas fields in the Arabian Sea.
The Directorate General of Hydrocarbons (DGH) in May-end had slapped the demand notice on them, which included interest and certain other charges over a gross amount it calculated following the October 2016 final partial award (FPA), sources in the government and the PMT joint venture said.
The notice does not contain any date for making the payment or the consequences that would follow if the payment is not made, they said.
Besides, they added, it was issued without waiting for the arbitration panel to give its final award after hearing rejoinders from the parties to the dispute and, in the last stage, quantifying the amount payable.
When contacted, a RIL spokesperson acknowledged being notified of "computation of the purported share of government of India's profit petroleum and royalty alleged to be payable by the contractor pursuant to the Government of India's interpretation of Arbitration Tribunal's Final Partial Award dated October 12, 2016."
Terming the demand notice as "premature," RIL said the "quantification of liabilities (if any) of the parties arising out of the Partial Award have to be determined by the Arbitration Tribunal after the Parties have made their respective submissions on quantification."
It said: "The Arbitration Tribunal is yet to schedule the timeline for the quantification phase. Apart therefrom before the process of quantification can commence certain outstanding issues will have to be resolved. RIL has already responded to the Government's demand notice appropriately."
The spokesperson said RIL has already challenged the FPA before the English courts and the matters are sub-judice.
RIL and Shell had last November challenged in English court a three-member arbitration panel headed by Singapore- based lawyer Christopher Lau's FPA upholding the government view that the profit from the fields should be calculated after deducting the prevailing tax of 33 per cent and not the 50 per cent rate that existed earlier.
It also upheld that the cost recovery in the contract is fixed at $545 million in Tapti gas field and $577.5 million in Panna-Mukta oil and gas field. The two firms wanted that cost provision be raised by $365 million in Tapti and $62.5 million in Panna-Mukta.
Sources said the government has joined the appeal in the English court, rendering infructuous the process of the arbitration panel giving the final award and quantifying the amount payable.
"The way arbitration works is that the panel first gives a FPA. It then gives time to parties to dispute to file appeals and hears them. The final award is then given. In the final stage, the amount payable is quantified," a source said.
Since the judicial seat of the arbitration is at London and that the arbitration agreement is governed by the English law, any challenge to the partial award in effect puts on hold the arbitration tribunal's process.
So, only after the court disposes of the appeal can the arbitration tribunal work on final award and quantification of the amount payable, the source said.
He further added that if the court was to rule that the partial award was not good in law, the panel may decide not to scrap its earlier award and may even be wound-up. pti