PMT Fields Case: UK court denies Indian govt's appeal

New Delhi: A UK court has denied the Indian government permission to appeal a recent order that potentially reduced the liability of Reliance, Shell and ONGC in the ongoing arbitration over the finances of the Panna, Mukta and Tapti (PMT) oil and gas fields, sources familiar with the matter said.The court on Friday denied government the leave to appeal in the so-called ‘agreement case’ in the decade-old PMT dispute over sharing of profit between the government and three companies that operated the fields. This apparently means the arbitration panel would have to reconsider the issue in view of the court’s latest order, sources said.The British court had earlier rejected most issues raised by the companies against the arbitration panel’s earlier order, which largely upheld the government’s contention in the dispute.74432384 No Hints on Govt’s Legal OptionsThe government has estimated that the partners need to pay $4.5 billion including interest, while the companies say the amount would depend on the final arbitration award.The government has not given any indication of whether it can or would explore more legal options before taking the matter back to the tribunal, while Shell said it was premature to comment.“We cannot comment as the court processes in various jurisdictions are still ongoing. The eventual impact of these processes will only be clear upon conclusion of the arbitration process. We are not in a position to state anything further at this stage,” a spokesperson for Shell said. Queries emailed to Reliance Industries and the oil ministry elicited no response till the time of going to press on Sunday.The dispute between the government and erstwhile stakeholders in PMT fields — Reliance Industries and Shell (formerly BG Exploration) — has been over the state’s share of income from these fields. RIL and Shell owned 30% participating interest each in the PMT fields while ONGC owned the balance 40% until last year when the production contract expired. ONGC, which now fully controls the field, is not part of the arbitration but will have to share any liability that may arise after the final award is announced.The arbitration has stretched for a decade and the matter has oscillated between court and arbitration tribunal for three years and is still at least several months away from any resolution, as per people with knowledge of the matter.In October 2016, the arbitration tribunal pronounced a Final Partial Award that went largely in favour of the government, following which the oil ministry computed the three oil companies’ liability and directed them in May 2017 to pay up the differential share of profit and royalty of $3.9 billion. The companies refused to pay, saying the award had been challenged in an English Court and the liability not yet quantified by the tribunal.The government, in turn, went to the Delhi High Court to enforce the award, and last year also urged the court to restrain sale of assets by Reliance until the money needed to pay up its liability in the PMT case is secured. The Centre’s estimate of liability has now jumped to $4.5 billion after including interest that must be jointly paid by Reliance, Shell and ONGC in proportion to their stakes in the PMT fields.The dispute is over issues such as the income tax rate considered to calculate profit from fields and the inclusion of marketing margin in sales price for computing the profit share and royalty, and cost recovery limit. The tribunal is slated to hear a key issue of cost recovery limit this month in London.

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