Earlier today, constituents of the Contractor (RIL, BP and Niko) for block KG-DWN-98/3 (KG D6) have received a communication from the Ministry of Petroleum & Natural Gas.
Based on the recommendations of the Shah Committee, the Government has made a claim of about USD 1.55 billion against the Contractor parties in respect of gas said to have migrated from neighbouring blocks.
In carrying out petroleum operations, the Contractor has worked within the boundaries of the block awarded to it and has complied with all applicable regulations and provisions of the Production Sharing Contract (“PSC”).
The claim of the Government is based on misreading and misinterpretation of key elements of the PSC and is without precedent in the oil & 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 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.
Key Contact:
Tushar Pania
Reliance Industries Ltd.
+ 91 9820088536
[email protected]