The oil ministry on Friday issued a notice of $ 1.55 billion to Reliance Industries and its partners BP and Niko for “unfairly enriching” by producing natural gas which flew from the adjoining oil fields of ONGC in KG basin.
However, RIL said refused to accept any liability and said that it will issue a notice of arbitration to the government.
RIL said that the claim of the government is based on misreading and misinterpretation of key elements of the production sharing contract (PSC) and is without precedent in the oil and gas industry, anywhere in the world.
“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. 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,” the firm said.
RIL alleged that liability of the contractor has not been established by any process known to law and the quantification of the purported claim is without any basis and arbitrary.
“RIL proposes to invoke the dispute resolution mechanism in the PSC and issue a notice of arbitration to the government. RIL remains convinced of being able to fully justify and vindicate its position that the government’s claim is not sustainable,” said the company.
In August, a government appointed Justice (Retd) A.P. Shah committee in its report had agreed with the allegations that gas had migrated from two KG basin oil fields of ONGC to adjoining KG-D6 block of RIL.
The report had said that government is entitled to claim restitution from RIL for the “unjust benefit it received and unfairly retained.” The report said that only the government is entitled to “claim restitution.”
