Reliance to contest government's $1.55 bln penalty

NEW DELHI, Nov 4 (Reuters) - India's Reliance Industries Ltd (BSE: RELIANCE.BO - news) is to contest a $1.55 billion fine imposed by the government on the company and its partners for selling gas belonging to the blocks of Oil and Natural Gas Corp, Reliance said in a statement.

"RIL proposes to invoke the dispute resolution mechanism in the production sharing contract and issue a Notice of Arbitration to the Government," the statement said.

India's oil ministry on Friday issued a notice to Reliance and its partners UK-based energy giant BP and Calgary- based Niko Resources Ltd (Toronto: NKO.TO - news) for extracting gas from the adjacent blocks operated by Oil and Natural Gas Corp.

"In carrying out petroleum operations, the contractor has worked within the boundaries of the block awarded to it and has complied with all applicable regulations and provisions of the Production Sharing Contract," the statement said.

The government's claim is not sustainable, Reliance said. The company said: "The liability of the contractor has not been established by any process known to law and the quantification of the purported claim is without any basis and arbitrary".

(Reporting by Nidhi Verma. Editing by Jane Merriman)