Government slaps $1.5 billion penalty on Reliance Industries in ONGC gas dispute

The company and its partners have been given 30 days to respond to the Oil Ministry's penalty notice

The government has fined Reliance Industries and its partners $1.55 billion for drawing and selling natural gas belonging to state-owned ONGC in the Krishna Godavari basin over the last seven years, The Indian Express has reported. The government had constituted the AP Shah committee to look into the migration of natural gas from ONGC’s block to the nearby fields of Reliance Industries.

India’s oil ministry on Friday issued a notice to Reliance and its partners UK-based energy giant BP and Calgary- based Niko Resources Ltd for extracting gas from the adjacent blocks operated by Oil and Natural Gas Corp.

“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,” the statement said

The company and its partners have been given 30 days to respond to the Oil Ministry’s penalty notice, Reuters reported. The report said the private explorer’s shares fell by 1.6% after the penalty was issued.

RIL is believed to have exploited the natural gas that migrated to its block from ONGC’s adjoining block. A November 2015 study by US-based consultant DeGolyer and MacNaughton noted that up to 11.122 billion cubic metres of natural gas had migrated from ONGC’s 98/2 area to the adjoining KG-D6 block of RIL in the Bay of Bengal between April 1, 2009, and March 31, 2015.

In a report on the matter submitted later, former Delhi High Court chief justice AP Shah said RIL can be fined based on either the value of the migrated gas produced, or to be produced, or on the profit it made from the enrichment, taking into consideration its expenses and sales figures. Shah, however, had clarified that ONGC did not have locus standi to make complicated claims against Ambani’s Reliance.

Reliance had said it had the right to recover the capital expenditure incurred for development, drilling and other facilities as well as operating costs.