Gas row: All you need to know about RIL's $1 bn fine

The company has been penalised for using migrated gas from the block of ONGC in KG basin

Reliance Industries Ltd (RIL) and its foreign partners, BP Plc and Niko Resources, may have to pay a penalty of more than $1 billion for using the migrated gas from the block of state-run Oil and Natural Gas Corporation (ONGC) in the Krishna-Godavari basin off the Andhra pradesh coast. 

According to reports, the Directorate General of Hydrocarbons calculated the $1 billion penalty, after considering the account capital and operational expenditures undertaken by RIL to take out the gas that had migrated to its basin.

Here is everything you need to know about the penalty imposed on the Mukesh Ambani-led group: 

1. In a report by Justcice A P Shah committee, it found the operators guilty and recommended the compensation on RIL and its partners for “unjust benefit” received through migration of gas. Reports suggest that the government is set to come out with a notification in this regard by the end of this week.

2. Last month, the ministry of petroleum and natural gas had asked the Directorate General of Hydrocarbons (DGH) to calculate the penalty needed to be charged from RIL for using migrated gas. DGH, technical arm of the petroleum ministry, had already given its report calculating the amount of penalty, which was in the range of $1-1.5 billion.

3. As reported by Business Standard, the DGH had taken the capital and operational expenditure incurred by RIL into account before coming up with a final figure. It is likely to have deducted the royalty, cess and profit petroleum that the contractors have paid the government on the gas produced so far. The estimate of ONGC’s loss was based on a gas price of $4.2 per million British thermal unit.

4.  Shah panel had stated that it faced limitations in providing a figure to the final value of the migrated gas produced by RIL during the term of its lease because of the lack of data and the committee's inherent technical limitations. A report submitted by DeGolyer and MacNaughton (D&M) in November 2015, too, had stated that about 11.12 billion cubic metres (bcm) of natural gas had migrated to the RIL fields from ONGC's idle fields. According to D&M's report, the reservoirs in ONGC's KG-DWN-98/2 (KG-D5) and the Godavari-PML are connected with the Dhirubhai-1 and 3 (D1 and D3) fields located in the KG-DWN-98/3 (KG-D6) block of RIL.

5. The Shah panel report said that RIL had knowledge about the possible migration in 2003, while ONGC, too, had prior understanding about the continuity way back in 2007. The panel also said ONGC was not entitled to receive a share of compensation that RIL and its partners would pay because hydrocarbons were a national asset. 

Timeline of events:

Jul 2013: ONGC alleges that Reliance Industries intentionally extracted gas from its blocks in KG-D6
 

May 2014: ONGC moves Delhi HC and states that its Godavari Block and discovery block KGDWN-98/2 are contiguous to RIL-owned KG-D6
 

Nov 2015: Consultant D&M submits report, establishes that over 11.2 billion cubic meters of gas had migrated from ONGC’s idling KG fields
 

Dec 2015: A P Shah panel set up to look into legal implications
 

Aug 2016: Shah panel’s report confirms migration of gas from ONGC’s fields to RIL
 

Sept 30: Govt accepts Shah panel report in totality