Tribunal rejects BP's claim for legal cost against govt

In a rebuff to BP plc, an international tribunal has held that the British energy giant cannot claim any legal cost from the Indian government as it was never part of an arbitration its partner Reliance Industries filed in the gas migration row with ONGC.

Last month, the three-member international arbitration tribunal by a majority vote held that Reliance could contractually produce and sell any gas that might have migrated from adjoining fields of state-owned Oil and Natural Gas Corp (ONGC) into its area.

It asked the Government of India to pay Reliance USD 8.3 million to cover for the legal cost but rejected USD 1.47 million claimed by BP and another USD 156,930.03 claimed by Canada's Niko Resources -- two minority partners in eastern offshore KG-D6 fields.

 

"Not being a party to the arbitration should the costs incurred by each of them be included as those incurred by the Claimant (Reliance) and recoverable from the Respondent (Government of India)? In the Tribunal's view, this should not be," the majority order said.

An e-mail sent to BP India for comments remained unanswered.

Reliance had sought USD 13.48 million in legal cost, including USD 1.6 million incurred by BP and Niko.

Of USD 11.85 million Reliance claimed as cost incurred by it, the tribunal allowed USD 8.2 million after trimming down some of the expense, according to the order.

Reliance claimed USD 2.74 million in fee for its counsel and senior advocate Harish Salve but the panel felt that "based on the length of the oral hearings, the pleaded case, the witnesses' statements and expert reports field in this arbitration", his fees "appear to be exceedingly high".

It felt it was "not fair or reasonable to impose" this on the government and went on to trim it to USD 750,000.

It trimmed down other legal fees as well.

Also, the arbitration tribunal chairman's fee and expenses totalling to USD 2.6 million were sought from the Government of India.

The panel asked the government to pay an interest at the rate of 4.31 per cent from the date of award till the payment is made.

Oil Minister Dharmendra Pradhan last week said the government will challenge the award in Delhi High Court.

With one member dissenting, the panel had held that the production sharing contract for eastern offshore KG-D6 fields "does not prohibit but permits" Reliance "to produce and sell gas which migrated into the sub-sea reservoir lying within (its) Contract Area from a source outside the Contract Area".

And so "there is no question of 'unjust enrichment'," it held. Reliance "has not been and will not be unjustly enriched by any production of migrated gas as a result of Petroleum Operations conducted within its Contract Area".

Reliance is the operator of KG-D6 block with 60 per cent interest, while BP plc of UK holds 30 per cent and Niko Resources of Canada the remaining 10 per cent.

The Oil Ministry had on November 4, 2016, slapped a demand notice on Reliance-BP-Niko combine for producing in seven years ending March 31, 2016 about 338.332 million British thermal units of gas that had seeped or migrated from ONGC's blocks into their adjoining KG-D6 in the Bay of Bengal. It claimed USD 1.55 billion from the three for the same.

Reliance on November 11, 2016 slapped an arbitration notice disputing the claim.