RIL decides not to boycott A P Shah panel in gas dispute with ONGC


In a U-turn, Reliance Industries has decided to participate in the deliberation of one-man A P Shah Committee deciding over the company allegedly producing gas belonging to state-owned ONGC.

While Reliance Industries and Canada’s Niko Resources had initially decided to boycott the panel set up by the government contending it had no legal basis and only arbitration can decide such disputes, its partner BP plc had been cooperating with it.
“At the first meeting of the Shah Committee on December 31, Reliance and Niko said they will not cooperate. However at the last meeting on February 9, they were present,” ONGC Chairman and Managing Director Dinesh K Sarraf told reporters here.

Participation in the deliberation of the meeting is being seen as a U-turn from the company’s earlier stand of boycotting the proceedings. A Reliance spokesperson did not immediately revert when reached for comments. The panel had given the companies one-month time to make their submissions over the dispute and ONGC has already done that, he said.

“I cannot disclose what we have told the Shah Committee,” he said. ONGC is seeking compensation from RIL for the gas that allegedly flowed from its KG blocks to neighbouring fields of RIL.

It rejected contentions that the cost incurred by RIL in setting up production facilities at KG-D6 will have to be first deducted before any money is due to it, saying the private company had invested money on the basis of discovered and producible gas resources it projected in its block. None of the investments made was for producing ONGC gas.

Moreover, all that investment incurred has been recovered by RIL since April 2009 from sale of gas, 15% of which has now been established by an independent consultant to have come from ONGC’s blocks.

RIL in deciding not to cooperate with the Shah Committee had contended that the defined process in law is not being followed in the current matter and that disputes under the signed Production Sharing Contract (PSC) have to be referred to arbitration.

It had stated that the company and ONGC have no underlying contract between them and so the only process in law for any dispute to be adjudicated has to be in a court of competent authority. Sarraf said the committee will meet next on March 19.

Oil Ministry officials said the Shah panel was constituted after the Delhi High Court directed it to decide on the dispute within six months of receiving a report of the independent consultant DeGolyer and MacNaughton (D&M).

D&M, which was appointed mutually by RIL and ONGC under orders from the Court, in its November 30 report established that reservoirs in ONGC’s KG basin blocks KG-DWN-98/2 (KG-D5) and the Godavari-PML are connected with Dhirubhai-1 and 3 (D1 & D3) field located in the KG-DWN-98/3 (KG-D6) Block of RIL.