Government names G S Singhvi on RIL-ONGC arbitration panel

27 Dec 2016


The government has named former Supreme Court Judge G S Singhvi on the three-member arbitration panel that will decide on the validity of its $1.55-billion compensation claim from Reliance Industries Ltd for "unfairly enriching" itself by producing natural gas belonging to state-owned Oil and Natural Gas Corp.

Reliance and its partners BP Plc of the UK and Canada's Niko Resources, who had on 11 November slapped an arbitration notice on the government disputing the $1.55 billion demand, have named former UK high court judge Bernard Eder to the panel.

"They (RIL-BP-Niko) named the arbitrator last month and the government has nominated Singhvi on the panel now," a senior official told PTI.

 The two arbitrators will now decide on a presiding judge of the arbitration panel.

The petroleum ministry had on 3 November issued a notice to RIL, Niko and BP seeking $1.47 billion for producing in the seven years ended 31 March 2016 about 338.332 million British thermal units of gas that had seeped or migrated from ONGC blocks into their adjoining Krishna-Godavari D6 block in the Bay of Bengal.

After deducting $71.71 million royalty paid on the gas produced and adding an interest at the rate of Libor plus 2 per cent,  totalling $149.86 million, a total demand of $1.55 billion was made on RIL, BP and Niko.

RIL is the operator of the KG-D6 block with 60 per cent interest while BP holds 30 per cent. The remaining 10 per cent is with Niko Resources.

The official said the arbitration will get underway once all the three-members are in place.

The government's compensation claim flowed from the report of the Justice (retd) A P Shah Committee.

The committee, in its 28 August report, concluded that there has been "unjust enrichment" to the contractor of the block KG-DWN-98/3 (KG-D6) due to production of the migrated gas from ONGC's blocks KG-DWN-98/2 and Godavari PML.

The government, the official said, accepted the recommendations of the committee and consequently decided to claim restitution from RIL-BP-Niko for "the unjust benefit received and unfairly retained".

So a notice was sent, he said, adding that the government is also pressing RIL to pay $174.9 million of additional profit petroleum after certain costs were disallowed because of KG-D6 output being lower than targets.

The cost recovery issue is also being arbitrated separately.

Originally, ONGC had sued RIL for producing gas that had migrated from its blocks KG-DWN-98/2 (KG-D5) and Godavari PML in the KG basin to adjoining KG-D6 block of RIL.

Under direction of the Delhi High Court, the government had appointed a one-man committee under retired Justice A P Shah to go into the issue. Shah said the compensation should go to the government as it is the owner of all unproduced natural resources.

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