Vedanta, led by Anil Agarwal, got relief when the Supreme Court on Wednesday rejected the government’s statement challenging an arbitration award that allowed the company to recover $ 499 million instead of $ 198 million that (the government) had limited to develop. the Ravva oil and gas fields.
The dispute concerns the interpretation of the production sharing contract (PSC) entered into by the parties and, specifically, the recoverability of base development costs (BDC) incurred by contractors in the Ravva field.
Both the government and Cairn Oil and Gas (a Vedanta vertical) had entered into a PSC in 1993. Under the agreement, it was decided that the party should carry out development of the field, including 21 wells, at a limited cost. of $ 188.98 million along with charges of 5 percent, which is known as BDC. The dispute is related to cost recovery for a period between 2000 and 2007.
The government’s claim was that the contractor unilaterally recovered $ 499 million, which was more than was limited. The case was later taken to a Malaysian court, which ruled in Cairn’s favor in January 2011. Then, in 2018, the matter was brought before the Delhi High Court, which rejected a stay of the court’s order. Later, the government appealed against the order in the Supreme Court.
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“We welcome the decision of the Supreme Court in the matter. This verdict would help create a positive sentiment in the global business community. We look forward to redoubling our efforts to make India Aatma Nirbhar in the hydrocarbons sector and to continue to work closely with the government, ”said Sunil Duggal, Group Executive Director, Vedanta.
Videocon Industries was another defendant in the case as it has an interest in the field.
In response to questions from Business Standard, Cairn said that this ruling ended ambiguity on various issues and upheld a fair arbitration process followed by Indian courts. Vedanta had acquired Cairn India from Britain’s Cairn Energy in August 2010 for $ 8.67 billion.
The Ravva oil and gas field is located in the shallow area of the Krishna-Godavari basin on the east coast of India. ONGC owns 40% of the block, followed by Videocon 25%, Cairn 22.5% and Ravva Oil 12.5%.
Average production in the Ravva block during 2019-20 was 14,232 barrels of oil equivalent per day (boepd), while it increased to 22,037 boepd during the first quarter of 2020-21.
Vedanta is the sole bidder for Videocon’s stake in the Ravva oil and gas field, which is part of Videocon’s assets that is in the process of insolvency at the National Company Law Court (NCLT).
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