Upbeat RIL, BP drop gas price case against government

 British Petroleum Plc on Friday confirmed the withdrawal of a gas price arbitration case it had filed with partner Reliance Industries Ltd against the Indian government.

The withdrawal comes close on the heels of BP and RIL announcing an investment of Rs 40,000 crore in new gas fields in the Krishna-Godavari basin.

By taking back the case against the government, RIL-BP become eligible to charge a premium for natural gas extracted from difficult terrain and new offshore fields.

RIL and BP had in May 2014 filed for international arbitration after the new pricing formula approved by the UPA government was deferred at the insistence of the Election Commission. Going by the UPA-approved formula, the gas price would have doubled in 2014. But when the Prime Minister Narendra Modi-led NDA government came to power, it rejected the formula.

In March, the government set the price for gas from “deep-water, ultra-deep-water and high pressure-high temperature areas” at $5.56 a unit as against $2.48 a unit for gas extracted from normal fields.

But the policy said companies like RIL, fighting cases against the government, would not be eligible for the benefit. The company has now overcome the hurdle. RIL chairman Mukesh Ambani and BP chief executive Bob Dudley last week announced a plan to invest $6 billion in new fields in deep-sea fields.