Reliance: Government loses $111 million arbitration award challenge in dispute with Reliance/Shell – Times of India

New Delhi: The government has lost its appeal in English High Court Against an arbitration award of $111 million in favor of Reliance Industries Limited and Shell in a cost recovery dispute in the western offshore Panna-Mukta and Tapti oil and gas fields.
high court judge Ross Cranston The June 9, 2022 ruling that the government should have brought its objections to the arbitration tribunal, which was not meeting the required thresholds, when the first 2021 award was issued, said two sources with knowledge of the matter.
Rejecting the government’s arguments, the court observed that the objections are restricted by an English law principle, whereby a party cannot raise matters in new proceedings which could have been raised in earlier proceedings.
Though an email sent to the Ministry of Petroleum and Natural Gas for comments did not elicit any response, officials said the government would study the court’s order and seek appropriate forums for remediation.
sent a separate email to Reliance Also remained unanswered for comments.
BG Exploration and Production India, owned by Reliance and Shell, on December 16, 2010, pulled up the government for arbitration on statutory dues including cost recovery provisions, benefits due to the state and royalty payable. They wanted to increase the cost limit that could be recovered from the sale of oil and gas before sharing the profits with the government.
The Government of India also raised counter claims on expenses incurred, increased sales, additional cost recovery, and under accounting.
A three-member arbitration panel headed by a Singapore-based lawyer Christopher Lau The Final Partial Award (FPA) was issued by a majority vote on October 12, 2016. It upheld the government’s view that the profit from farms should be calculated after deducting the existing tax of 33 per cent and not at the earlier rate of 50 per cent.
It also maintained that the cost recovery in the contract has been fixed at $545 million in the Tapti gas field and $577.5 million at the Panna-Mukta oil and gas field. Both companies wanted $36.5 million in Tapti and $62.5 million in Panna-Mukta to be provided for.
It added that the royalty was to be calculated after including the marketing margin charged over the wellhead value of natural gas.
The government used the award to seek dues of $3.85 billion from Reliance and BG Exploration and Production India Limited (BGEPIL).
Both firms challenged the 2016 FPA before the English High Court, which on April 16, 2018, sent a challenged issue back to the Arbitral Tribunal for reconsideration.
The arbitration tribunal ruled in favor of both in a judgment dated January 29, 2021.
“The Arbitral Tribunal decided in large part in favor of the claimants (Reliance and BGEPIL) through their final partial award on 1 October 2018. The Government of India and the claimants filed an appeal against this 2018 FPA before the English Commercial Court,” Reliance said. said in its annual report last year.
“The English Commercial Court dismissed the Government of India’s challenges to the 2018 Final Partial Award and upheld the claimants’ challenge that the Arbitration Tribunal had limited jurisdiction over the issue and referred the issue back to the Arbitration Tribunal,” added this.
The final decision on the issue came in January 2021, it had said.
Subsequently, both the parties filed clarification applications before the tribunal, which on April 9, 2021, accepted minor corrections requested by Reliance and Shell and rejected all clarification requests from the government.
Subsequently, the government challenged the award before the English High Court.
He said the court delivered its judgment on June 9, 2022.
The government used the 2016 partial award to not only raise demands on Reliance and Shell to $3.85 billion, but also sought to block Reliance’s proposed $15 billion deal with Saudi Aramco on the grounds that The company owes money.
Thereafter, the court asked the directors of the company to file an affidavit for listing the assets.
Reliance and Shell had opposed the government’s plea in the Delhi High Court, saying the petition was an abuse of process as none of the arbitration awards fixed any final liability of dues on the company.
The annual report had said, “The Government of India has also filed an execution petition before the Delhi High Court … seeking the implementation and implementation of the 2016 FPA.” “The contention of the claimants is that the performance petition of the Government of India is not maintainable.”
The execution petition of the government is still pending.
“The claimants have also filed an application for recall/amendment challenging the orders of the Delhi High Court directing the directors to file an affidavit of assets. The matter is listed for hearing on July 13, 2021. “It was said.
The Panna-Mukta (mainly an oil field) and the Central and South Tapti (gas fields) are shallow water areas located in the offshore Bombay Basin. Discovered by the state-owned Oil and Natural Gas Corporation (ONGC), they were bid for a consortium of ONGC (40 per cent), Reliance (30 per cent) and Enron Oil and Gas India Ltd (30 per cent) in 1994 .
In February 2002, BGEPIL acquired Enron’s 30 percent stake in the joint venture. Later BGEPIL was taken over by Shell.
The Production Sharing Contract (PSC) for the farms set out the cost of deductibles on field operations from the oil and gas sold before profit sharing with the government. Denying certain items in cost would result in higher profit petroleum for the government.
Reliance and BGEPIL sought enhancement of the cost recovery limit through arbitration.