ONGC to seek compensation for natural gas taken out by RIL from KG Basin block

Public-sector explorer ONGC will claim compensation for natural gas worth Rs 11,000 crore being taken out by Reliance Industries (RIL) from its block in the Krishna Godavari (KG) Basin. The move is seen in the light of a report by a one-member panel of former chief justice of Delhi High court A P Shah, which said, “Government of India, and not ONGC, is entitled to claim restitution from RIL.”

The Shah panel has noted that ONGC has no locus standi to bring a tortious claim against RIL for trespass or conversion, since it does not have any ownership rights or possessory interest in the natural gas. In a first reaction after the panel report has been submitted to the government, Dinesh K Sarraf, chairman and managing director of ONGC, said that it was a “tough call” to highlight the issue of gas migration, which the explorer was able to stand up to only after a detailed technical assessment.

“The gas reserves are discovered by ONGC and therefore the company has economical rights over the reserves. ONGC will write to the petroleum ministry seeking compensation,” a senior company official told FE. ONGC has apprised its board of the issue and currently examining the ‘legal and contractual’ consequences of the Shah panel report, the official added.

The Shah panel, in its report submitted on August 31, said that ONGC, on its part, also had some form of prior knowledge about possible continuity in 2007, but did not act promptly or with due diligence, and took up the matter only six years after it first obtained relevant information.

The Shah panel had accepted the finding of a November 2015 study done by US-based consultant DeGolyer and MacNaughton (D&M), highlighting that as much as 11.122 billion cubic metres of natural gas had migrated from ONGC’s 98/2 area to the adjoining KG-D6 block of RIL in the Bay of Bengal between April 1, 2009 and March 31, 2015, which RIL commercially exploited. Petroleum minister Dharmendra Pradhan said that his government would take appropriate action on this issue by September 30.

“Many consequences will follow (from Shah panel report)… now whether we get paid for (the gas migration) or the government would be paid is the subsequent thing. We are happy that our apprehensions have been confirmed,” Sarraf said on Thursday. “We had put our arguments before the Shah committee that ONGC had no knowledge of this (migration) earlier. And as soon as ONGC came to know of this, we took effective actions in 2013. Now, looking at the report, it seems that whatever submission we made to the Shah committee, there is no mention of that (in the report). I do not know what the reason is,” Sarraf told mediapersons.