The government has fined Reliance Industries a penalty of about Rs 6,600 crore ($1.235 billion) for the steep fall in gas output from the KG-D6 block.
The oil ministry sent a notice to Reliance Industries admonishing it for the decline in production and said the company had violated the production sharing contract (PSC) and wilfully drilled fewer wells than what it had committed in its approved plan.
The company says unexpected geology caused the decline in production and data has established that drilling more wells would not help. View: This is negative for the stock. We currently have a Buy rating on the stock with a TP of Rs890.
RIL has already slapped an arbitration notice on the ministry saying the production sharing contract allows for operators to recover 100 per cent of the capital and operating expenditures on an oil and gasfield and does not in any way link the cost recovery to production.
The ministry has refused to join arbitration saying there is no dispute till now, but the notice establishes there is a dispute over the amount of cost that can be recovered.
Sources said according to the approved field development plans, RIL should have put 22 wells on production for 61.88mmscmd by April and 80mmscmd by the end of the year from 31 wells
....more info
The oil ministry sent a notice to Reliance Industries admonishing it for the decline in production and said the company had violated the production sharing contract (PSC) and wilfully drilled fewer wells than what it had committed in its approved plan.
The company says unexpected geology caused the decline in production and data has established that drilling more wells would not help. View: This is negative for the stock. We currently have a Buy rating on the stock with a TP of Rs890.
RIL has already slapped an arbitration notice on the ministry saying the production sharing contract allows for operators to recover 100 per cent of the capital and operating expenditures on an oil and gasfield and does not in any way link the cost recovery to production.
The ministry has refused to join arbitration saying there is no dispute till now, but the notice establishes there is a dispute over the amount of cost that can be recovered.
Sources said according to the approved field development plans, RIL should have put 22 wells on production for 61.88mmscmd by April and 80mmscmd by the end of the year from 31 wells
....more info