Government to recover USD 3.85 billion from Reliance, Partners

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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. Is. Is. used to be

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

On 16 December 2010, Reliance and BGEPIL 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 over-expenditure, increased sales, additional cost recovery, and under-accounting claims.

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

It also said that the cost recovery in the contract has been fixed at USD 545 million in Tapti gas field and USD 577.5 million in Panna-Mukta oil and gas field. Both companies wanted a provision of US$36.5 million in Tapti and US$62.5 million in Panna-Mukta.

It added that the royalty was to be calculated 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 USD 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 judgment passed by the tribunal in 2016 has dealt with 66 issues out of 69. An official statement said the decision was taken in favor of the Government of India.

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 payment as per the award. Therefore, the Government has filed an application before the Delhi High Court for the execution of the Final Partial Award 2016.

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, dismissing 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 in favor of the contractors.

“Out of the claims of USD 402 million, the tribunal allowed a cost of USD 143 million and denied a cost of USD 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 USD 259 million cost and returned this portion of 2018 to the tribunal in March 2020.

“The tribunal heard the matter again and in January 2021 ordered an additional amount of USD 111 million in favor of the contractors. This was challenged by the government in the English Commercial Court. The present decision of 9 June 2022 pertains to this challenge.

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

“Further, despite two partial awards of USD 111 million and USD 143 million in favor of the contractor, the final partial award by the arbitral tribunal under 2016 resulted in substantial interest in the Government’s favor and the execution petition is now filed before Delhi. It is being pursued through the High Court,” the statement said.

The government further said that the English Court’s latest order and order of June 9 (US$ 11.11 million) also rejected Reliance-BGEPIL’s claim of USD 148 million.

The government used the 2016 partial award to not only raise demand by USD 3.85 billion, but also to block Reliance’s proposed USD 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 filed a petition in the Delhi High Court, responding to the government’s plea.

There is an abuse of process as no arbitration award has fixed any ultimate 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. Discovered by the state-owned Oil and Natural Gas Corporation (ONGC), they were bid for a consortium of ONGC (40 per cent), Reliance (30 per cent) and Enron Oil and Gas India Ltd (30 per cent) in 1994 .

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

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