RIL, Shell, ONGC asked to pay $3 billion in penalty

NEW DELHI: The government has ordered Reliance Industries (RIL), Shell and ONGC to pay a combined $3 billion in penalty following an arbitration award in the Panna Mukta Tapti (PMT) oil field dispute that went in favour of the government, according to people familiar with the matter. RIL and Shell have appealed the arbitration award in a UK court.

The oil ministry sent out a demand notice last month to Reliance and Shell, which own 30% each in the PMT fields off the Mumbai coast, as well as to ONGC that owns the balance 40% participating interest. The three companies have to pay the penalty proportionate to their stake in the fields.

The arbitration panel had upheld the government view that the profit from the fields should be calculated after deducting the prevailing tax of 33%, and not the 50% rate that existed earlier.

This will significantly increase the government’s share of profit petroleum. The tribunal also upheld the government’s position that marketing margin should be included in the price of gas, which would also increase its share of profit petroleum as well as a royalty payment.

RIL, Shell and the oil ministry declined to comment.

The dispute over state share of profit petroleum and royalty from the PMT fields raged for many years. Late last year, a London-based tribunal of arbitrators issued a final partial award (FPA), upholding key contentions of the government.

Reliance Industries Limited (RIL)

Oil and Natural Gas Corporation Limited (ONGC)