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Govt pushes for dispute resolution panel to resolve oil, gas wrangles

New Delhi

With an overhang of disputes choking investments in the oil and gas sector, the government is pushing for contractual wrangles being sent to an expert committee for time-bound resolution but the move has found few takers due to inherent conflict of interest in such a process, sources said.

The government had in December last year constituted a ‘Committee of External Eminent Persons/Experts’ comprising former oil secretary G C Chaturvedi, former Oil India Ltd head Bikash C Bora and Hindalco Industries Ltd Managing Director Satish Pai, for dispute resolution without having to resort to the tardy judicial process.

But no major dispute has been referred to the panel so far, two sources with direct knowledge of the development said.

The panel has not inspired much confidence in oil and gas companies as most of their disputes are with the government over contractual interpretations and procedural issues.

And the very same government is not just deciding on how the dispute is to be resolved but also appointing members of the dispute resolution panel as well as setting its terms of reference, they said.

There is an inherent conflict of interest that has kept most disputes away from the committee, they said.

India’s oil and gas sector has been plagued by disputes from cost recovery to production targets, and companies as well as the government have resorted to lengthy and costly arbitration followed by judicial review — a process that takes years to resolve differences.

As per the official notification, the committee is to arbitrate on a dispute between partners in a contract or with the government over commercial or production issues for oil and gas.

“Any dispute or difference arising out of a contract relating to exploration blocks/ fields of India can be referred to the committee, if both parties to the contract agree in writing for conciliation or mediation and further agree to not invoke arbitration proceedings thereafter,” the December 2019 notification said.

Once a resolution has been referred to the panel, the parties cannot resort to arbitration or court case to resolve it.

Oil ministry’s upstream technical arm, the Directorate General of Hydrocarbons (DGH) is to provide secretarial assistance to the Committee.

Sources said most of the disputes over terms and regulations around oil and gas fields are between companies and the DGH.

The panel, they said, was appointed without consultations with the industry.

Also, the “government reserves the right to change the terms and conditions as and when required without assigning any reasons thereof”, the notification said.

The panel has a tenure of three years and the resolution is to be attempted to be arrived within three months.

The members and the parties may, however, extend the time for arriving at a settlement agreement by mutual agreement.

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