So, basically the centre has seeks backing of court to stall Reliance plan to sell stake to Saudi’s Aramco.

Challenge Arbitral Award In India
Challenge Arbitral Award In India

Background to PSC:

The Panna Mukta (an oil field) and the mid and south Tapti field (a gas field) which were offshore, shallow water fields located inn offshore water basins, were initially discovered and operated by ONGC. In February 1994, the production sharing arrangement was developed between Enron , RIL and ONGC, with participating interest of 30,30 and 40 percent respectively, for the duration of 25 years.

In feb,2002, the Enron’s 30 percent share was acquired by British Gas Exploration and Production India Ltd.

Dispute :

The dispute came to everyone’s notice when Reliance industries and BG groups, in December 2010 initiated a dispute about recovery of cost of operations. ONGC had not joined arbitration. Meanwhile the govt was of view that profits from the fields should be calculated after deducting prevailing tax of 33 percent and not 50 percent the rate that existed.

A three member panel headed by Singapore based lawyer Christopher Lau upheld the government view effectively significantly increasing the government’s share in profit petroleum from the oil produced at the PMT fields. RIL and Shell had last November challenged the award in an English court.

The government’s demand notice includes interest and other charges over a gross amount calculated following 2016 final partial order (FPA). The notice does not contain date of making payment and consequences, if payment is not made. The arbitration panel also upheld that the cost recovery in the contract is fixed at USD 545 million in Tapti gas field and USD 577.5 million in Panna-Mukta oil and gas field. Reliance Industries and Shell wanted that cost provision be raised by USD 365 million in Tapti and USD 62.5 million in Panna-Mukta.

The central government’s application which was heard by Delhi High Court on Friday seeks to restrain RIL, to dispose off its assets and to sell its 20 percent stake to Saudi Aramco.

The two companies have conveyed to the government that they don’t want their production-sharing contract for PMT extended beyond December 2019 when the 25-year term ends.

Challenge:The oil ministry ordered Reliance, Shell and ONGC to together pay $3.8 billion as the increased share of the government’s earnings from the PMT fields, following an arbitration award in the government’s favour. Reliance and Shell challenged the award in a UK court, which upheld the arbitration panel’s decision on most counts but referred the matter over how much development cost the companies could recover back to the tribunal, which is again hearing it.RIL has argued that the partial award of dated 12.10.2016 arising out of Panna-Mukta and Tapti production sharing contract does not quantify any amount as being due to the government and since the parties included has already challenged the award in British High Court, there is no order which restrains RIL to carry out the transaction.

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