Lok Sabha Question No. 3927 (UNSTARRED), answered on 2017-03-27
Subject: Arbitration Cases of Oil Field Disputes
Ministry: PETROLEUM AND NATURAL GAS
Asked by: KRISHNAN NARAYANASAMY RAMACHANDRAN

## GOVERNMENT OF INDIA MINISTRY OF PETROLEUM & NATURAL GAS

LOK SABHA STARRED QUESTION NO. 3927 TO BE ANSWERED ON 27 th  March, 2017

Arbitration Cases of Oil Field Disputes

3927: SHRI K.N. RAMACHANDRAN:

## पेट्रोलियम एवं प्राक ृ तिक गैस मंत्री

## Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a) whether the Directorate General of Hydrocarbons (DGH) has approached the Government for resolving oil field  disputes  with  contractors/companies  and  also  given certain suggestions for improving the dispute redressal mechanism to minimize incidence of arbitration cases;
- (b) if so, the details thereof and the response of the Government thereto;
- (c) the details and current status of cases of oil field disputes pending with Arbitrators; and
- (d) the  steps  taken/being  taken  by  the  Government  to  resolve  such  cases  in  a  time  bound manner?

## ANSWER

## पेट्रोलियम एवं प्राक ृ तिक गैस मंत्रािय में राज्य मंत्री ( स्विंत्र प्रभार ) ( धमेन्द्र प्रधान )

MINISTER OF STATE (INDEPENDENT CHARGE) IN THE MINISTRY OF PETROLEUM & NATURAL GAS (SHRI DHARMENDRA PRADHAN):

(a) & (b) DGH had given suggestions for improving the dispute resolution mechanism such as encouraging conciliation proceedings; examination by Multi Disciplinary teams and Executive Committee of DGH  on  potential litigations; timely appointment of arbitrators by the Government;  appointing  arbitrators  having  domain  expertise;  delegating  powers  to  DGH  to create  its  own  panel  of  law  firms/advocates,  delegation  of  powers  for  fee  approval  to  the Executive Committee of DGH; Vetting of the proposals by advisory committee for referring the matters  to  Sole  Expert/Conciliation,  changing  seat  of  arbitration  to  India  while  approving  the extensions in Pre-NELP PSCs.

Government has enhanced the powers of DGH for hiring of counsels for defending arbitrations. In  the  policy  for  extension  of  PSCs  for  small  and  medium  sized discovered fields, the seat of arbitration during the extended period has been kept in India. Arbitrators and counsels are being timely  appointed.  Also,  contractors  are  being  provided  a  forum  in  the  Ministry  for  resolving disputes  and  meetings  are  being  held  at  various  levels  to  sort  out  the  issues  related  to  gas balancing, abandonment obligations etc.  Good International Petroleum Industry Practices have been codified and Guidelines for Site Restoration have been prepared to reduce ambiguity on these aspects, thereby reducing the possibility of litigation.

- (c) The list of arbitration cases is placed at Annexure I.
- (d) The Government has come out with a Policy Framework for Relaxation, Extensions and Clarifications at the Development and Production Stage for Early Monetization of Hydrocarbon Discoveries,  through  which  many  issues  pertaining  to  different  blocks  have  been  resolved. Further, the Policy on Testing Requirements has been brought out to avoid disputes in future.

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## DETAILS AND STATUS OF ARBITRATION CASES

|   Sl. No. | Particulars                                                                                                                                                                                                         | Issue involved                                                                                                                                                                                                          | Year of initiation   |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------|
|         1 | Reliance Industries Limited, British Gas Exploration Pvt. Ltd vs. UOI                                                                                                                                               | Dispute relating to development cost and cost recovery limit as per Art. 13 of the PSC. Production loss, Development cost, audit objections by Govt. Etc.                                                               | 2011                 |
|         2 | Reliance Industries Ltd. vs. UOI (Four Blocks KG-OSN-97/3, KG- OSN-97/4, MB-OSN-97/1, GK- OSN-97/1)                                                                                                                 | Dispute under Article 5.7 of the PSC for payment of unfinished MWP by RIL and new general policy of calculating cost of unfinished MWP issued by the Govt.                                                              | 2012                 |
|         3 | Reliance Industries Limited vs. UOI (KG-DWN-98/3)                                                                                                                                                                   | Dispute relating to disallowance of cost on account of reduction in production of gas from D1 and D3 fields of KG- DWN-98/3.                                                                                            | 2013                 |
|         4 | Reliance Industries Limited vs. UOI (KG-DWN-98/3 gas pricing guidelines issue) (Arbitration held at New Delhi) Arbitration Petition 1/2015 Supreme Court of India                                                   | Dispute relating to deferment of Domestic Natural Gas Pricing Guidelines 2014.                                                                                                                                          | 2014                 |
|         5 | Videocon Industries Limited vs. UOI UOI Vs. Videocon Industries Limited CS(OS) 2074/2015- Anti Suit- Delhi High Court. Videocon Industries Limited Vs. Union Of India, MOP&NG (FAO(OS) 450/2015) - Delhi High Court | ONGC Carry issue.                                                                                                                                                                                                       | 2003 & 2014          |
|         6 | Assam Company India Limited vs. UOI                                                                                                                                                                                 | Dispute relating to acquisition of 60% PI with operatorship of Canoro Resources Limited which was terminated by the Government.                                                                                         | 2013                 |
|         7 | Hindustan Oil & Exploration Company VS. GOI                                                                                                                                                                         | Dispute relating to payment of Liquidate Damages by contractor for non-completion of MWP commitments and cost of unfinished work programme.                                                                             | 2013                 |
|         8 | NIKO Resources VS. UOI                                                                                                                                                                                              | Dispute relating to payment of royalty, cess, cost of wells, compression charges                                                                                                                                        | 2013                 |
|         9 | GEECL vs. UOI (Arbitration held at New Delhi)                                                                                                                                                                       | Dispute relating to overlapping of block area.                                                                                                                                                                          | 2015                 |
|        10 | RIL, BGEPIL vs. GOI(Restitution of unjust Enrichment)(Shah Committee Report) KG-DWN-98/3 Block                                                                                                                      | Since RIL has produced migrated gas and hence unjustly enriched itself. GOI has demanded for restitution and cost of migrated gas produced and sold by RIL. Against the said demand of GOI, RIL has invoked arbitration | 2016                 |

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## Annexure