Reliance liable to pay damages to govt in KG-D6 gas row: Shah panel

The Justice AP Shah committee looking into dispute between state-run Oil and Natural Gas corporation (ONGC) and Reliance Industries Ltd (RIL) on migration of natural gas in their adjacent gas fields, has opined that RIL is bound to pay the government for the natural gas it has drawn from an adjacent block of ONGC.

RIL, which has been producing gas from its Krishna-Godavari (KG) basin block off the Andhra coast for the past seven years, has also been drawing gas from an adjacent field belonging to ONGC, the committee headed by Ajit Prakash Shah, former chief justice of the Delhi High Court, has found.

Independent expert DeGolyer & MacNaughton (D&M) has estimated that over 11 billion cubic metres (bcm) of gas had flowed from the ONGC block to the contiguous RIL's fields between 1 April 2009 and 31 March 2015.

As much as 11.122 bcu of ONGC gas had migrated from its Godavari-PML and KG-DWN-98/2 blocks to adjoining KG-D6 of RIL between 1 April 2009 and 31 March 2015. At prevailing prices, the gas is worth Rs11,000 crore.

This has almost emptied ONGC's reservoirs while RIL continues to produce gas from D1&D3 fields in KG-D6 block, some of it belonging to ONGC.

In a 'comprehensive report' submitted to oil minister Dharmendra Pradhan, the one-man committee, however said the Mukesh Ambani-controlled firm should pay the government and not ONGC for drawing of gas from the ONGC's block.

''RIL's action of producing and selling gas migrated from ONGC block is unjust enrichment,'' the report said, adding that over 11 billion cubic metre (bcm) of gas had flowed from the ONGC block to RIL's fields between 1 April 2009 and 31 March 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 Directorate General of Hydrocarbons (DGH) at the time they allegedly obtained the information.''

The committee further 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.''

The committee in the report, besides suggesting how compensation has to be paid, also makes recommendations for avoiding such disputes in future.

Justice Shah, however, refused to divulge the contents of his report, but 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.''

Pradhan said 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.

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, DGH and the government.