Govt partners to recover $3.85 billion from Reliance

The government on Monday said it will recover $3.85 billion from Reliance Industries and its allies in the Panna/Mukta and Tapti oil and gas fields case and is considering an appeal against an English court order on a cost recovery dispute in the same field. has been

Responding to an English High Court last week to dismiss India’s appeal against a $111 million international arbitration award in favor of Reliance Industries Ltd and Shell-owned BG Exploration and Production India Ltd (BGEPIL), the government In a statement it said it had the right to seek the permission of the English Commercial Court to challenge this decision.

Reliance and BGEPIL had on December 16, 2010 pulled up the government for arbitration on statutory dues including cost-recovery provisions, benefits due to the state and royalty payable. They wanted to raise the limit on the cost that could be recovered from the sale of oil and gas before sharing the profits with the government.

The Government of India also raised counter claims on expenditure incurred, increased sales, additional cost recovery, and under accounting.

A three-member arbitration panel, headed by Singapore-based lawyer Christopher Lau, issued the Final Partial Award (FPA) on October 12, 2016 by a majority vote. It upheld the view of the government that profit from farms should be calculated by subtracting the prevailing. Tax of 33% and not the rate of 50% which existed earlier.

It also maintained that the cost recovery in the contract has been fixed at $545 million in the Tapti gas field and $577.5 million at the Panna-Mukta oil and gas field. Both the firms had demanded that a cost provision of $365 million be made in Tapti and $62.5 million in Panna-Mukta.

It added that the royalty was to be calculated after taking into account the marketing margin charged over and above the wellhead value of natural gas.

The government used the award to demand dues of $3.85 billion from Reliance and BGEPIL.

“Disputes arose between the parties which were referred to arbitration for resolution in 2010. So far, the arbitral tribunal has passed eight substantial partial awards. The final partial award in favor of the Government of India, adjudicating 66 of the 69 issues tribunal in 2016,” an official statement said.

As of the 2016 award, the government demanded Reliance and BGEPIL to pay more than USD 3.85 billion in interest.

“The contractor (Reliance-BGEPIL) failed to make the payment as per the award. Therefore, the government has filed an application before the Delhi High Court for execution of the final partial award 2016,” the statement said.

Reliance-BGEPIL challenged the 2016 final partial award before the English Commercial Court. The challenges were classified under nine broad heads. “In April, 2018, the English Court ruled in favor of the Union of India, rejecting eight of the nine challenges,” the statement said.

“With regard to the ninth challenge, the Court directed that the matter be referred back to the Tribunal for reconsideration. The Tribunal subsequently passed its order on the challenge, partly in favor of the contractors.

“Out of the $402 million claims, the tribunal allowed a cost of $143 million and denied a cost of $259 million to the contractors,” it said.

Meanwhile, both the government and Reliance-BGEPIL challenged the 2018 award before the English Commercial Court. The court denied the tribunal’s $259 million cost and returned this portion of 2018 to the tribunal in March 2020.

“The tribunal heard the case again and ordered an additional $111 million in favor of the contractors in January 2021. This was challenged by the government before the English Commercial Court. The current decision of June 9, 2022 relates to this challenge. is,” it said.

“The Government of India reserves the right to seek the leave of the English Commercial Court to challenge the judgment passed by it,” the Indian government said in a statement. It did not say whether it would appeal.

“Furthermore, despite two partial awards of $111 million and $143 million in favor of the contractor, the larger award of interest amounting to more than $3.85 billion by the arbitral tribunal under the final partial award 2016 is in favor of the Government and is now in favor of the Government. is being pursued through the execution petition filed before the Delhi High Court,” the statement said.

The government further stated that the English Court’s latest order and order dated 9 June ($111 million) also rejected Reliance-BGEPIL’s $148 million claim.

The government used the 2016 partial award to not only raise demand to $3.85 billion, but also to block Reliance’s proposed $15 billion deal with Saudi Aramco on grounds that the company owed money. Is.

Thereafter, the court asked the directors of the company to file an affidavit for listing the assets.

Reliance and Shell had opposed the government’s plea in the Delhi High Court, saying the petition was an abuse of process as none of the arbitration awards fixed any final liability of dues on the company.

The Panna-Mukta (mainly an oil field) and the Central and South Tapti (gas fields) are shallow water areas located in the offshore Bombay Basin. Invented by the state-owned Oil and Natural Gas Corporation (ONGC), they were bid for a consortium of ONGC (40%), Reliance (30%) and Enron Oil and Gas India Limited (30%) in 1994 .

In February 2002, BGEPIL acquired Enron’s 30% stake in the joint venture. Later BGEPIL was taken over by Shell.

The Production Sharing Contract (PSC) for the farms set out the cost of deductibles on field operations from the oil and gas sold before profit sharing with the government. Denying some items in cost would result in higher profit petroleum for the government.

Reliance and BGEPIL sought enhancement of the cost recovery limit through arbitration.