Reliance Industries gets $1.2-billion penalty fine for using ONGC gas in KG basin

Mumbai,Nov1:Reliance Industries Ltd and one of its foreign partners, Niko Resources, may be slapped with a penalty of around $1.2 billion (approximately Rs 8,000 crore) for using migrated gas from an Oil and Natural Gas Corporation-owned block in the Krishna-Godavari basin for commercial purposes. According to reports, the government will issue the Mukesh Ambani-led company a notice in this regard within this week.

RIL is believed to have exploited the natural gas that migrated to its block from ONGC’s adjoining block. The Directorate General of Hydrocarbons calculated the figure by taking into account the capital and operational expenditure RIL must have incurred while taking out the migrated gas, officials told The Financial Express. The directorate submitted its report to the Oil Ministry last week, which is likely to issue the company a notification later this week.

Up to 11.122 billion cubic meters of natural gas had migrated from ONGC’s 98/2 block to RIL’s adjacent KG-D6 block in the Bay of Bengal between April 1, 2009, and March 31, 2015, according to a study conducted by United States-based consultant DeGolyer and MacNaughton in November 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.

State-run ONGC had brought the migration to the directorate’s notice in July 2013. It had earlier argued that the quantification of the penalty should be done on the basis of the migrated gas that RIL produced. The private explorer, however, had said it had the right to recover the capital expenditure incurred for development, drilling, and other facilities as well as operating costs.

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