RIL-ONGC dispute: Justice Singhvi appointed arbitrator

New Delhi: The oil ministry has appointed G.S. Singhvi, a former Supreme Court judge and Competition Appellate Tribunal chairman (Compat), as the government’s arbitrator in a $1.55 billion dispute with Reliance Industries Ltd (RIL) over alleged extraction of gas from a reservoir connected to that of state-run Oil and Natural Gas Corp. on the east coast.

Singhvi, who retired from Compat earlier this month, will consult an arbitrator chosen by RIL for identifying a third neutral arbitrator and the place of arbitration, said a government official, who asked not to be named. RIL is in the process of formalizing the appointment of an arbitrator it has identified, another person privy to the development said on condition of anonymity.

The government hired the arbitrator about a fortnight ago after RIL served a notice invoking arbitration in the second week of November. Reliance, which claims the oil ministry’s $1.55 billion demand raised on 4 November as ‘without any basis and arbitrary’, wants the issue to be settled through arbitration. The ministry made the demand after the justice A.P. Shah panel, which looked into ONGC’s claim of gas flow between the neighbouring fields of the two companies, recommended on 31 August that RIL should compensate for the “unfair enrichment” accrued to it by way of retaining the gains of gas flow into its block KG-DWN-98/3 (KG D6).

The quick pace at which the parties are proceeding with arbitration suggests a desire to get the thorny issue out of the way as one of the largest investors in the oil and gas sector prepares to bring more discoveries in the KG D6 block to production under a liberal pricing regime approved in March. The second person quoted above said RIL, which has invited expressions of interest from gas field development services, expects to firm up these contracts in early 2017.

An email sent to RIL remained unanswered as of press time. BP, Reliance’s 30% partner in the KG-DWN-98/3 block, declined to comment on the development.

RIL said on 5 November that its liability to pay compensation had not been established by any process known to law. While making the recommendation, Justice Shah had relied on the estimate of gas flow between the fields arrived at by DeGolyer and MacNaughton, a US-based consultant jointly hired by the ONGC and RIL.

According to Anish De, partner and head of the oil and gas practice at KPMG in India, a quick dispute resolution mechanism for industries across sectors will help in improving the ease of business in the country.

Atanu Chakraborty, director general of hydrocarbons, the upstream regulator in the oil and gas industry, said in an interview in October that the country has to continuously fine tune dispute resolution mechanisms and keep improving upon the existing contractual regime as has been done in the past.