The government has ordered Reliance Industries Ltd (RIL), Shell, and ONGC to pay a combined $3 billion as penalty over an arbitration award regarding the Panna Mukta Tapti (PMT) oil field, according to an Economic Times report.
The report, which cited people familiar with the matter, also said that RIL and Shell have appealed the arbitration award in a UK court. The report further added that the arbitration panel had upheld the government view that the profit from the fields should be calculated after deducting the prevailing tax of 33 per cent, instead of the 50 per cent rate that existed earlier.
The disputes over the PMT block relate to, among other things, the limits of cost recovery, profit sharing, and audit and accounting provisions of the PSCs. The value of the claim made by RIL and others exceeded $500 million, according to RIL’s 2016 annual report.
Even as RIL fights over claims in this oil field, the regulatory issues have not stopped the company from making future investments in upstream facilities in India. In June, the company, in partnership with BP Plc, announced it will invest Rs 40,000 crore in the Krishna Godavari block in the next three to five years.
Here is a timeline of the legal battle over the PMT oilfield.
- December 2010: RIL and BG Exploration and Production India Limited referred a number of disputes, differences, and claims arising under two Production Sharing Contracts entered into in 1994 to arbitration against the government. RIL and BG hold 30 per cent stake each in the Panna/Mukta and Tapti fields while the remaining is with state-owned Oil and Natural Gas Corp (ONGC).
- May 2012: The arbitration tribunal passed a number of final partial awards, largely in RIL’s favour. This was followed by the government challenging the Tribunal’s awards before the Delhi High Court.
- May 2014: The Supreme Court, however, allowed for arbitration to be carried out in the English courts.
- October 2016: A London-based arbitration panel ruled in the Indian government’s favour over recovery cost from RIL and BG Group for the PMT oilfields. This was an interim award and the final arbitration award was to follow procedural hearings due from December last year. According to sources, the final award was made in the early part of 2017.