Essar faces Rs315cr fine for illegal CBM sales
Essar Oil and Gas faces high oil ministry penalties for drilling wells and producing CBM outside the boundary of its Raniganj East block RG(East)-CBM-2001/1.
In a four-page notice issued on May 13 (2024), oil ministry undersecretary Ravi Pandey asks Essar to explain by May 28 (2024) why it should not be fined Rs1000 ($12.5) for violating the Oilfields Regulation and Development Act 1948 and the Petroleum and Natural Gas Rules, 1959. Pandey also asks Essar to explain why the ministry should not recover from it Rs315.53cr ($39.4m) for "undue enrichment" from CBM produced until September 2023 without a valid lease or licence from areas outside the Raniganj block.
A source claims that this penalty amount is lenient. He adds that the oil ministry considered the gas price as Rs14.68/cubic metre ($4.90/mmbtu) when gas was sold at Rs45/cubic metre ($15/mmbtu).
Essar received the Raniganj PEL from West Bengal authorities in March 2005, after it was awarded the block in July 2002. From December 2014 to February 2017, Essar drilled 32 CBM wells across a 23-sq km area "for which it had no valid PEL or PML," according to the oil ministry.
Of these 32 wells, the ministry claims 28 are still producing. Until September 2023, Essar produced 214.88m cubic metres "valued at Rs341.57cr ($42.6m) from such area wherein it was not entitled to carry out petroleum operations."
Pandey quotes from a Supreme Court ruling in Anil Ambani's case against brother Mukesh Ambani over KG-D6 hydrocarbons and said the government of India is the owner of natural resources such as gas, which it holds in trust "for the Indian people." Therefore, the ministry believes the CBM extracted by Essar belonged to the government of India, and Essar had no right to extract and sell it.
"The contractor (Essar) has unduly enriched itself and is liable to restitute the value of the CBM gas extracted to the government of India," says the oil ministry. Pandey adds that even if the CBM reservoir extended beyond the contract area, Essar should have formally applied for it to be included in the Raniganj development area and awaited formal approval before carrying out CBM operations there.