Ex-Oz judge McHugh withdraws from RIL gas row arbitration?

New Delhi: Supreme Court appointed former Australian judge Michael Hudson McHugh is believed to have withdrawn from the arbitration of Reliance Industries’ KG-D6 gas dispute. McHugh, who had previously declined to become an arbitrator in the dispute but later relented and accepted the offer, formally sent an email withdrawing from the case, sources said.

The apex court had on 29 April named McHugh, former judge of the High Court of Australia, as the third arbitrator in the dispute over cost recovery in KG-D6 gas block. In November 2011, RIL had started arbitration proceedings against the government, seeking a decision on its entitlement to recover investments made in the KG-D6 gas field from sales.

The government had disallowed as much as $1.005 billion of its investment as KG-D6 output lagged targets. Production from main fields in the block was way short of 80 million standard cubic meters per day target.

The cost disallowed was raised to $2.376 billion for output lagging targets in four years ending 31 March, 2014. RIL and its partners say the action is not as per the production sharing contract (PSC) and they are entitled to recover all costs of the block in the Bay of Bengal.

However, the arbitration couldn’t start as the government refused to play ball and it was only after two-and-a-half years that the third arbitrator was appointed by the Supreme Court. Withdrawing from the Tribunal, McHugh had stated that he would not be available before 15 September due to his previous preoccupations and since the Supreme Court wanted the process to be expedited, he would not be able to act as the Chairman of the tribunal.

Meanwhile, Reliance Industries Ltd (RIL) and its partner BP have surrendered one more oil and gas block, reducing their tally to five from 21 exploration acreage they held three years back. ‘CY-D6 Block relinquished as part of portfolio rationalization,’ RIL said in an investor presentation post announcing its first quarter earning numbers.

Reliance Industries Ltd had in February 2011 announced a ‘transformational’ deal when the United Kingdom's BP picked up 30 per cent stake in its 23 oil and gas blocks. 

However in August that year, the government allowed them to form a partnership in only 21 blocks. Since 2012, RIL and BP have been pruning their portfolio, shedding not so viable acreage. This year, they shed CY-PR-DWN-2001/3 or CY-D6 block. RIL had in February 2012 announced a discovery in well SA1 in the block. 

This discovery was named D-53. RIL said its current portfolio includes producing KG-DWN-98/3 or KG-D6 block in Bay of Bengal and Panna/Mukta and Tapti oil and gas fields in the western offshore. With BP, it is left with five blocks including KG-D6 and gas discovery areas of NEC-OSN-97/2 

(NEC-25) and CY-DWN-2001/2 (CY-D5).