Government Slaps $1.5 Billion Penalty On Reliance Industries


NEW DELHI — The government has sought $1.55 billion from Reliance Industries and its partners for drawing natural gas belonging to state-owned ONGC in the KG basin over the last seven years.

The oil ministry has sent a notice to RIL seeking $1.55 billion compensation, sources privy to the development said.

The Justice A P Shah Committee had in a report presented to oil ministry on 30 August 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 1 April 2009 and 31 March 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.”

Stock exchanges, BSE and NSE Ltd, have asked Reliance Industries for a clarification on this news and how it will materially affect the company.

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 1 April 2009 and 31 March 2015.

At prevailing prices, the gas was worth Rs11,000 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 31 March 2015, 44.32 per cent 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.