The Mukesh Ambani-led Reliance Industries (RIL) will not withdraw its cost recovery arbitration against the government over the Krishna-Godavari (KG) asset, meaning RIL’s face-off with the government will prevent RIL from availing of the liberal gas pricing regime approved earlier this year.
“We are not withdrawing our cost recovery arbitration. We cannot give up our legal rights. Our upstream business is in partnership with BP and we are confident of constructively finding a solution," said RIL Chairman Mukesh Ambani in response to a shareholder query at the company’s AGM on Thursday.
Mr. Ambani however refrained from commenting on the report by the panel headed by former chief justice of Delhi High court AP Shah detailed Tuesday, which said that the company made "unjust" gains by pumping natural gas that flowed from ONGC's adjoining block.
Withdrawing the arbitration relating to price fixing for gas is a pre-condition for availing of the new liberal pricing formula the government approved on 10 March.
The government's move to free gas-pricing for undeveloped gas fields in difficult areas will not apply to RIL's KG-D6 finds unless the firm withdraws arbitration challenging the government's authority to decide rates.
In April, RIL had invited tenders for drilling and recovering gas from three deep-sea clusters off the east coast of India including the R-series, Satellite-series and MJ-1 fields, indicating that the RIL-led consortium was willing to bury the hatchet and go ahead with drilling new fields.
In April, BP had welcomed the new pricing policy adopted for difficult-to-operate geological areas saying that along with its consortium partners, it was "working with the government to progress activities in their blocks.”
BP is a 30 per cent partner in RIL’s 21 gas blocks, including in the KG- DWN-98/3, known as KG-D6. Canada’s Niko Resources holds 10 per cent in KG-D6.
The government had disallowed RIL's recovery of 2.756 billion as costs incurred and has claimed additional profit petroleum of $246.9 million in the KG-D6 block, citing that the company had missed the gas production target for five consecutive years beginning April 1, 2010. RIL and partners had challenged this, citing that the fall in output is a natural phenomenon and that they could be held responsible for it.
