ONGC Board Vertically Split On Claiming Gas Compensation
A section of the ONGC board wants the company to contest Shah committee recommendations.
The board of ONGC is split on the issue of claiming compensation for Rs 11,000 crore worth of natural gas spewing from its KG basin block into adjoining fields of Reliance Industries.
The Justice AP Shah Committee on the issue of gas migrating from idling ONGC blocks to RIL’s producing gas fields, last month opined that the compensation for “unjust enrichment” by the Mukesh Ambani-run firm should go to the government and not the state-owned firm. It was of the opinion that the gas belongs to the government and so it alone deserves to be compensated.
While ONGC had, in May 2014, not hesitated to file a case against RIL in the Delhi High Court and make the government a party to it, it is now vertically split on the issue. The section of the board which was responsible for the company taking up the issue of RIL producing ONGC’s gas now wants the company to strongly contest the Shah committee recommendation, sources said.
The section of the board also believes the company should approach the Delhi High Court since that was an option given by the court, in the event that ONGC was dissatisfied with any part of the dispute resolution, sources added.
The other section, however, says it is not wise to fight the government and the company, having proved its point that gas did indeed migrate to RIL fields, should accept the recommendations, they said.
The former group also says that the premise on which the Shah committee has based its recommendation was flawed, as according to the committee’s logic, even RIL is not an owner of the gas in its KG-D6 block and it should just be paid a fixed rate of return on investment and not be given pricing and marketing freedom.
The oil ministry has asked its technical arm, the Directorate General of Hydrocarbons, to quantify the amount of compensation that RIL has to pay.
The Shah Committee stated, “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.”
The Shah Committee in its report noted and accepted the findings of independent consultant D&M’s report that connectivity between the reservoirs in KG-DWN-98/3 (or KG-D6) block of RIL and ONGC’s KG-DWN-98/2 and Godavari PML blocks is established.
Since April 1, 2009, when RIL began production from KG- D6, to March 31, 2015, 7.009 and 4.116 billion cubic meters of gas had migrated from Godavari PML and D1 discovery of KG- DWN-98/2 block respectively to KG-D6.
Of this 5.968 and 3.015 bcm of gas was produced from Godavari PML and D1 discovery of KG-DWN-98/2 block respectively, through KG-D6.
The report further said by January 1, 2017, 7.519 and 4.377 bcm of gas would have migrated from Godavari PML and D1 discovery of KG-DWN-98/2 block respectively to RIL’s KG-D6. Of this, 6.549 and 3.395 BCM of gas would have been produced from Godavari PML and D1 discovery of KG-DWN-98/2 block respectively through KG-D6.