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RIL-led consortium gets 30 days to respond to $1.55bn penalty notice: Source

business Updated: Nov 05, 2016 00:14 IST
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The oil ministry has given Reliance Industries Ltd (RIL) and partners 30 days to respond to a $1.55 billion penalty notice. (Reuters)

The oil ministry has given Reliance Industries Ltd (RIL) and partners BP and NIKO thirty days to respond to a $1.55 billion penalty notice that was issued on Friday for selling gas belonging to blocks operated by Oil and Natural Gas Corp, an oil ministry source said.

Reliance’s shares fell by about 1.6% on the news.

International consultant DeGolyer & MacNaughton said in a report that 11.125 billion cubic meters of gas migrated during the six years to March 31, 2015, from ONGC’s two blocks in Krishna Godavari basin, off the country’s east cost, to the one operated by Reliance.

Reliance did not immediately respond to an email seeking comment.

ONGC’s two blocks are adjacent to the Reliance-operated block, in which UK-based BP holds 30% stake and Calgary-based Niko Resources Ltd has 10% share.

The Justice AP Shah Committee had in a report presented to the oil ministry on August 30 opined that RIL should pay the government for the natural gas it has drawn from an adjacent block of ONGC in the KG basin of the Bay of Bengal in the past seven years.

In its report, the one-member Shah panel said the Mukesh Ambani-run firm should pay for the gas that had migrated or seeped from ONGC blocks into its gas fields.

“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 panel, however, said the compensation should go to the government and not ONGC.

The committee said: “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.”

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.

Shah committee had relied on report of independent consultant D&M to make its case.

D&M had in its November 2015 report indicated that as on March 31, 2015, 44.32% of the gas initially in place in Godavari PML and 34.71% 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.