In an apparent bid to pre-empt the petroleum ministry’s move to disallow part of the $5.8 billion (Rs 29,000 crore) expenditure that it had made so far to develop the KG-D6 gas field, Mukesh Ambani’s Reliance Industries Limited has served an arbitration notice.
Petroleum secretary GC Chaturvedi had last week said the ministry was moving toward restricting cost-recovery, which is 100% at present, in proportion to gas output.
Two days after the statement, Mukesh Ambani met Prime Minister Manmohan Singh on Thursday, but refused to give details of the visit.In the arbitration notice, Reliance is learnt to have said the move to limit the amount of expenditure by the ministry is
illegal and falls outside the purview of the Production Sharing Contract (PSC), which allows companies to recover 100% of their exploration and production costs.
RIL’s spokesperson said: “To finally resolve this cost recovery issue so as not to hinder future investments in this block, the company has begun arbitration proceedings against the government to have the company’s entitlement to recover its costs... finally determined by an independent tribunal.”
{{/usCountry}}RIL’s spokesperson said: “To finally resolve this cost recovery issue so as not to hinder future investments in this block, the company has begun arbitration proceedings against the government to have the company’s entitlement to recover its costs... finally determined by an independent tribunal.”
{{/usCountry}}The company will seek a hearing in the arbitration at the earliest possible date, he added.
The arbitration notice is seen as a setback for global energy major BP’s plans to enter oil and gas exploration in India.
BP, which had paid Reliance a $7.2 billion (Rs 36,000 crore) for a 30% stake in its 21 oil and gas fields in India, was in the process of working out a joint strategy with Reliance to jointly develop KG-D6 and explore for other oil and gas fields in India.
According to a PTI report, “the notice asks the oil ministry to appoint arbitrators to decide on the issue. It said three arbitrators are to be appointed. The oil ministry and RIL would suggest one arbitrator each, while the third would be a judge.