RIL, ONGC Knew About Continuity Of KG Basin Reservoir, Didn’t Disclose To Regulator: AP Shah
Shah panel says RIL & ONGC knew about KG Basin linkage but didn’t disclose to DGH
The Justice AP Shah panel has concluded that Reliance Industries Ltd. (RIL) and ONGC Ltd. knew about the continuity of the gas reservoir but failed to disclose the same to the Directorate General Hydrocarbons (DGH), according to the report available on the website of the Ministry of Petroleum and Natural Gas.
Reliance Gained Unduly?
The AP Shah panel report said RIL had prior knowledge about connectivity and continuity of the reservoir as per its 2003 appraisal report. ONGC had some form of prior knowledge about possible continuity, but did not act promptly or with due diligence, and took up the matter only six years after it first obtained relevant information.
The allegations of prior knowledge on the part of both RIL and ONGC must be enquired into further, with particular emphasis laid upon the failure of both parties to present the information they had to the DGH at the time they allegedly obtained the information.AP Shah Panel Report
The report further said, whatever benefit RIL received in terms of the migrated gas is liable to be returned to the Government of India.
Shah Panel Faults RIL, ONGC
The Shah panel concluded that ONGC is not entitled to claim restitution from Reliance for the unjust benefit it received and unfairly retained, “ONGC has no locus standi to bring a tortious claim against RIL for trespass/conversion since it does not have any ownership rights or possessory interest in the natural gas.”
The panel stopped short of quantifying the unjust enrichment. The DeGoyler and MacNaughton (D&M ) report will form the basis for the migration of gas up till 2015, and the subsequent migration of gas post-2015 should be inquired by the government. The final decision should be taken by the government, in light of the limitations faced by the committee to assess the data and costs involved, the report said.
RIL’s production of migrated gas and retention of the ensuing benefits amount to unjust enrichment, since the production sharing contract, in the absence of an order on joint development under Article 12, does not permit a contractor to produce and sell migrated gas.AP Shah Panel Report
The panel also said that it is unable to draw final conclusions regarding “RIL’s and ONGC’s prior knowledge, without any evidence being led before it.” It said the 2003 appraisal report reveals prima facie that “RIL had knowledge of connectivity and continuity of the reservoir” while ONGC had “some form of prior knowledge about possible continuity in 2007”.
The Way Forward
The Shah panel report said, based on the submissions made by RIL and ONGC, the gas production in the relevant fields is likely to cease because of pressure depletion, and the fields are expected to reach their technical limits for further gas production. Due to the fact that only meagre reserves are left in the relevant fields, there is no question of contemplating any kind of joint development, unitisation, or gas balancing, the report said.
The panel pointed out that the D&M Report appears to establish that there is practically no development or further production that can be carried out by ONGC in its fields in the current scenario.
The panel also suggested changes in the functioning of the regulator and assessment of ONGC’s role. The report said,
- The present case is a useful opportunity for the ministry of petroleum and natural gas and the Directorate General of Hydrocarbons to review and strengthen the disclosure system itself.
- The role of ONGC in the oil sector must be assessed with great scrutiny.
- The DGH must also look to become more proactive in exercising its regulatory authority, whether it is in the form of better vigilance, acquiring more incisive technical skills, or stronger enforcement powers.
- The government should look at the creation of a mechanism to amicably resolve disputes among parties, as and when they arise.
