Coal News We love to talk!

APR 27 2015

Oil Ministry rejects RIL's arbitration notice, terms it 'untenable'

  • Economic Times, ET Bureau / Hyderabad
  • Created: Mon 27th APR 2015

The Oil Ministry has rejected Reliance Industries' (RIL) latest arbitration notice challenging the government decision to take away 814 sq km of its KG-D6 gas block, saying it was misconceived and untenable in law.

The ministry held that the move is in accordance with the provisions of the contract and there's no dispute that needs to be arbitrated upon. Official sources said the ministry gave reasons for its stand and cited provisions of the Production Sharing Contract (PSC) for that, asking RIL to withdraw the notice forthwith.

In line with the guideline on giving up non-discovery area, RIL had in 2013 offered 5,385 sq km out of a total 7,645 sq km in KG basin KG-D6 block. 

But the ministry on October 30, 2013, ordered 6,198.88 sq km of total area to be taken away as the time of production had expired.

RIL on January 14 challenged this order, stating the 814 sq km of additional area contained five gas discoveries holding close to 1 trillion cubic feet of reserves.

Sources said the ministry took the line that the exploration period for the KG-D6 block had lapsed on July 15, 2008, and so were timelines for submission of appraisal and field development plan for any discovery.

Timelines for satellite discoveries -- D4, D7, D8, D16 and D23 -- had been overshot and no development plan was submitted by the operator, the ministry said.

The January 14 arbitration notice was the third relating to KG-D6 block. RIL had initiated arbitration proceedings over deferred gas pricing formula that sought to double rates to USD 8.4 per million Btu.

While its partners BP of the UK and Canada's Niko Resources are parties in the first two arbitrations, they are not part of the latest notice.

In the arbitration notice, RIL had demanded that the dispute of taking away the area be referred to arbitration, the relinquishment order be withdrawn and compensation be paid for breach of contract by the government.

According to the rulebook, a contractor is allowed to retain only that area where discoveries have been made.

But in the case of KG-D6, the Directorate General of Hydrocarbons (DGH) ordered a larger area to be pulled out as RIL had allegedly failed to develop the finds within the stipulated timeframe. 

RIL in the notice has said the October 2013 order breached its right to retain the fields and the time period for approving these discoveries 'never expired' as the block oversight panel had agreed to a phased approach for their development.


TOTAL Gas Gas pricing Oil Ministry Oil Reliance Industries limited Directorate General of Hydrocarbons Hydrocarbons Canada

Related News

  • Cut gas from non-priority areas for retail needs: Government to Gail  Read more
  • Govt releases Rs 7,000-cr subsidy arrears to oil retailers  Read more
  • NTPC's total installed capacity rises to 48,143 MW  Read more
  • BPCL may look at increasing Kochi refinery capacity to 22 MT  Read more
  • Gas output from RIL's KG-D6 fields drops to 30.8 mmcmd  Read more
  • Kerala to cash in on renewable energy resources  Read more
  • BPCL to lay 20-inch insulated pipeline to boost capacity in Kochi refinery  Read more
  • ONGC says tests show RIL drilled into its field  Read more
  • Viable to produce gas at $5.61: DK Sarraf, ONCG  Read more
  • Decision on natural gas prices important to revive investment: P. Chidambaram  Read more