Reliance should pay damages to Govt in KG-D6 row: Shah panel

In a ‘comprehensive report’ submitted to the Oil Minister Dharmendra Pradhan on the gas dispute between Reliance and ONGC, the one-man panel said the Mukesh Ambani firm should pay for the gas from the ONGC block it has produced.

“RIL’s action of producing and selling gas migrated from ONGC block is unjust enrichment,” the report said, adding that over 11 billion cubic metres of gas had flowed from the ONGC block to RIL’s fields between April 1, 2009 and March 31, 2015. Of this, RIL has already produced about 9 bcm.

“The committee believes that the allegations of prior knowledge on the part of both RIL and ONGC must be enquired into further, with particular emphasis laid upon the failure of both parties to present the information they had to the DGH at the time they allegedly obtained the information.” 

The committee said further: “The Government of India, and not ONGC, is entitled to claim restitution from RIL for the unjust benefit it received and unfairly retained. ONGC has no locus standi to bring a tortuous claim against RIL for trespass/conversion since it does not have any ownership rights or possessory interest in the natural gas.”

The one-man committee headed by Ajit Prakash Shah, former chief justice of the Delhi High Court, in the report detailed not just how compensation has to be paid, but recommendations for avoiding such disputes in future.

As much as 11.122 billion cubic metres of ONGC gas had migrated from its Godavari-PML and KG-DWN-98/2 blocks to adjoining KG-D6 of RIL between April 1, 2009 and March 31, 2015. At prevailing prices, the gas was worth Rs 11,000 crore.

While ONGC’s reservoirs have almost emptied, RIL continues to produce gas from D1&D3 fields in KG-D6 block, some of it belonging to ONGC. Refusing to divulge the contents of his report, Shah said the report is “comprehensive” and addresses all terms of references. “The committee has also recommended future course of action for the ministry,” he said.

Pradhan said the ministry has one month to decide on the report. “The government will take appropriate action,” he said.

“Justice A P Shah has submitted a comprehensive report on the gas migration issue. He has preliminarily briefed us on report,” he said without elaborating.

The panel has given “some observations” on the report of the independent expert DeGolyer & MacNaughton (D&M) that established reservoir continuity between the KG-D6 and contiguous ONGC-operated blocks.

Asked if the Shah panel, like the D&M report, had established that gas from ONGC block had migrated to KG-D6 fields, Pradhan said, “Yes.”  The Shah committee has “detailed economic and legal implications” of the gas migration under the signed production sharing contract, he said, adding that the report will be made public after the ministry studies it.

“Allow me to get back to you with detailing of the report,” he said.

D&M had in its November 2015 report indicated that as on March 31, 2015, 44.32 per cent of the gas 

initially in place in Godavari PML and 34.71 per cent in KG-DWN-98/2 (both of ONGC) had migrated to KG-D6 of RIL. The report projected a higher proportion of gas migration and its production through RIL operated KG-DWN-98/3 (KG-D6) block by the end of 2019.

Pradhan said the Shah Committee was asked to look into legal, financial and contractual provisions on the gas migration row.

It was also asked to report any “acts of omission and commission” on part of all the stakeholders, including RIL, ONGC, the Directorate General of Hydrocarbons (DGH) and the government. RIL has 60 per cent interest in KG-D6 block while Niko Resources of Canada holds 10 per cent. BP of UK holds the remaining 30 per cent.