OIL & GAS INDUSTRY LEGAL
Presented By : Group 10
Pavan Kumar Singh (101)
Saurabh Subodh (114)
Sarvendra Singh (63)
Savneet Kaur (84
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
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
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
Hence government came up with a concept called “Production Sharing
Under this scheme, the company will have to share royalty, according to the
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.
• 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.
• 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.
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.
• 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.
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
• 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.
PDVSA Vs Exxon Mobil and Conoco
Assets of ExxonMobil and ConocoPhillips were expropriated in 2007 after
they declined to restructure their holdings in Venezuela to give PDVSA
• 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