Oil & gas industry legal cases

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Oil & gas industry legal cases

  1. 1. OIL & GAS INDUSTRY LEGAL CASES Presented By : Group 10 Pavan Kumar Singh (101) Saurabh Subodh (114) Sarvendra Singh (63) Chandrasekhar (78) Anshumman (116) Savneet Kaur (84
  2. 2. Oil & Gas Industry Overview  The Oil & Gas includes the global processes of exploration extraction, refining, transporting (often by oil tankers and pipelines), and marketing petroleum products.  Oil accounts for a large percentage of the world’s energy consumption, ranging from as low of 32% for Europe and Asia, up to a high of 53% for the Middle East.  The world consumes 30 billion barrels of oil per year  The production, distribution, refining, and retailing of petroleum taken as a whole represents the world's largest industry in terms of revenue with a revenue of $4.5 trillion in 2012
  3. 3. Reliance KG Basin Case Production Sharing Contract (PSC)  If there is a direct “royalty” sharing formulas like conventional iron-ore mining, then private players will not be interested in taking the risk in this gas exploration activity.  Hence government came up with a concept called “Production Sharing Contract (PSC)”  Under this scheme, the company will have to share royalty, according to the profit made.  This is not the standard royalty model as seen in mining systems, where revenue is shared regardless of profitability. This PSC model allows the operator (RIL) to substantially recover his costs before the sharing of revenue.
  4. 4. Allegations • It is alleged that Reliance used false accounting-methods to show hugecosts and operating expenses to keep the profit low so that they have to pay less money to the Government. • Under a contract agreement of 2009 with the government for KG basin, RIL is supposed to sell gas at $ 4.2 per unit up to 31st March 2014. "Midway now, RIL has increased the sale price of gas with Government’s permission to $ 14.2 per unit. • Director-general of hydrocarbons (DGH) was responsible for looking after this exploration-activity, how much gas is generated, what is the operating cost, is there any real loss etc. (but as the common sense suggests) he might have taken “suitcases” to turn a blind eye to all this.
  5. 5. Our Opinion • In our opinion it is a clear case of government involvement with RIL by which the prices of gas were changed and no action was take because of pure ignorance which led to further suffering of other industries. • In this case the Supreme Court should order the Indian government to reevaluate the resource potential of KG basin field and re fix the price of gas with reliance industries with a strict clause of heavy penalty in case of any breech of rules and contract.
  6. 6. Vedanta & Cairn Energy Acquisition Case • The deal for acquisition of 40% stake of oil explorer Cairn India by Londonbased mining group Vedanta Resources got delayed due to a disagreement over the royalty payments to the government and obligation by ONGC. • A PIL filed by a Bangalore resident Arun Kumar Agarwal stated that the ONGC, in an agreement with Cairn group, had a clause that in case the Cairn Group wanted to sell its shares in Cairn India, it would first offer the same to the ONGC. • As per the clause, Cairn could sell its shares to other parties, only after the ONGC refused to buy the stake and the ONGC, thus had the right of first refusal (ROFR), it said. • Cairn Energy, however, signed a deal with the Vedanta group to sell its shares in Cairns India, without making an offer to the ONGC, the PIL said.
  7. 7. Judgement • Supreme Court Granted the Permission on Deal saying that if ONGC has No obligation Then It the Deal can be finalized • The Cabinet Committee on Economic Affairs (CCEA) on Jan 30 2011 gave its final approval to the London-based mining group Vedanta Resources Plc's acquisition of a majority stake in Cairn India Limited for $8.48 billion. But Cairn India Will have to pay the royalty.
  8. 8. Shell Oil Nigeria Case • A case was launched by farmers in 2008 in the Netherlands, where Shell has its global headquarters, seeking compensations for lost income from contaminated land and waterways in the Niger Delta region. • Farmers claimed that their livelihoods had been ruined by oil that spilled from Shell pipelines in their villages. • Shell argued that the spills had been caused by so-called bunkering — oil theft from the pipelines — as well as outright sabotage
  9. 9. Judgement • The court agreed with Shell in most of those spills, around the villages of Goi and Oruma. But it held that in one spill, near the village of Ikot Ada Udo, the local subsidiary, Shell Petroleum Development Co. of Nigeria, was liable for damages as yet unspecified — to one farmer.
  10. 10. PDVSA Vs Exxon Mobil and Conoco Phillips Assets of ExxonMobil and ConocoPhillips were expropriated in 2007 after they declined to restructure their holdings in Venezuela to give PDVSA majority control. • LEGAL ISSUE: Arriving at a settlement with ExxonMobil proved difficult with Venezuela offering book value for ExxonMobil's assets and ExxonMobil asking for as much as $12 billion. • SITUATION: This and a number of other matters including the claims of ConocoPhillips were put before the World Bank’s International Centre for Settlement of Investment Disputes. • OUTCOMES: PDVSA has paid compensation for assets it has nationalized including $255 million paid to ExxonMobil on February 15, 2012 in compensation for nationalization of ExxonMobil's Venezuelan assets in 2007.
  11. 11. Thanks

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