$1.55 billion penalty sought from RIL exaggerated, say analysts
Mukesh Ambani led Reliance Industries Ltd (RIL) may have to shell out roughly $1.15 billion a s net value of the $1.55 billion penalty that the government imposed on it on Friday. “The $.1 55 Billion imposed by the government is admittedly a gross number, which should be $1.15bn net to RIL, in our view,” said Saurabh Handa, analyst with CitiResearch in a 6th November dated report. The government slapped a $1.55 billion penalty on RIL for producing ONGC’s share of natural gas in the Krishna Godavari basin. The letter was sent to RIL on Thursday asking it to pay the penalty amount. RIL in its media statement issued on Friday said it plans to issue arbitration notice to the government. The company said it proposes to invoke the dispute resolution mechanism in the production sharing contract (PSC). “RILremains convinced of being able to fully justify and vindicate its position that the government’s claim is not sustainable. The contractor’s liability has not been established by any process known to law and the quantification of the purported claim is without any basis and arbitrary,” it said. The $1.55 billion (approx Rs 103.38 billion) penalty is also higher than the annual oil and gas segment revenue of the company. Besides, it would erode nearly one third of the profit of Rs 27,630 RIL made in 2015-16. The Citi analyst in his report further said the penalty almost equals the total revenues earned from the sale of these gas volumes without allowing operating expenditure and capital expenditure to be deducted. “.Even without getting into the merits & justification of the govt’s action, the calculation itself in our view appears flawed and the resultant penalty appears grossly exaggerated,” the report said. The brokerage had earlier estimated the penalty at $0.25 billion. Kumar Anish, analyst with HSBC Global Research in his 7th November report said the penalty lacks commercial, technical and contractual justification. “The KG-D6 consortium has just about managed to achieve a payback of its expenditure in financial year 2015-2016, 15 years after first expenditure and seven years after first revenue from the KG-D6 block. Taking the time value of money into account, the present value of all expenditure exceeds the present value of all revenue from the block,” he said. “Therefore, no case of a windfall gain can be made out, in our view. In fact, there is no profit from the block in present value terms, either,” he further added. Even while the two foreign brokerage firms termed the penalty to be on the higher side, various other analysts expect the company to be able to absorb it. Analysts expect the penalty to be legally contested further, leaving less room for any immediate impact. Edinson Volquez Womens Jersey
Government Gets 2 Months To Firm Up View On Cairn India’s Rajasthan Block Extension Plea
The government on Monday sought more time from the Delhi High Court to arrive at a final decision on Cairn India’s plea for extension of the production sharing contract (PSC) for the Barmer oil fields in Rajasthan. State-run Oil and Natural Gas Corporation Ltd. (ONGC) had in July notified the ministry of petroleum and natural gas about its decision to extend the 25-year contract. The high court had thereafter given the Centre three months to firm up its view on the matter. However, the Centre on Monday sought more time from the Delhi High Court, saying it is mulling a uniform policy to grant extensions to existing contracts for oil and gas fields. In response, the court asked the Centre to decide on Cairn India’s plea without linking it to the proposed final policy. The Centre has to submit its final decision by January 6. ONGC has agreed to a 10-year extension of the contract with Cairn India after the original contract expires in 2020. The company’s counsel Shashi Prabhu had told the court in July that the public sector unit (PSU) had sent its approval for extension to the ministry of petroleum and natural gas. In September, Cairn India’s counsel had argued that the company needs clarity on its extension plea, as it had already begun talks with international lenders to raise over Rs 300 billion which will be invested in the Rajasthan block – provided the licence is extended – and that investors cannot be kept in abeyance for long. Cairn India plans to invest in additional infrastructure after the original contract expires on 2020. The government was supposed to take a decision in June but it’s September now and nine months since the high court’s order. The company supplies 27 percent of oil and gas required by India. CA Sundaram, Cairn India’s Counsel to Delhi High Court. The government had earlier informed the court that the contract may not necessarily be extended on the same terms and conditions as the existing one. Cairn India’s Rajasthan block comprises Mangala, Bhagyam, Aishwariya and Raageshwari oil fields. The high court will hear the case on January 9, 2017 after the Centre submits its final decision. Cassius Marsh Authentic Jersey
PDVSA, India reach agreement on joint oil production ventures
Venezuela’s state-owned oil and natural gas company PDVSA and India have signed accords worth $1.45 billion whereby oil production is expected to increase from 430,000 barrels per day to 855,000 in less than a year. Exports in mind, there is a natiowide shortage of fuel. India’s ONGC Videsh Limited will disemburse $318 million for Indovenezolana, a joint venture in the San Cristobal Field in the Orinoco Oil Belt, where PDVSA remains a majority stakeholder, while Delta Finance BV will provide $1.13 billion for the joint venture Petrodelta, in which PDVSA will also hold a majority stake. “Those joint ventures together are currently producing 430,000 barrels. With investments in the next year or year and a half we are going to have a production of 855,000 bpd; in other words, an increase of 435,000 bpd,” said Venezuelan Oil Minister Eulogio Del Pino said during the signing of the agreements. One of the world’s main exporters of crude is trying to recover froma drastic price drop that has worsened the country’s trade deficit over the past three years. Meanhile, shortages in fuel supply have memories of queues three kilometres long or worse like during the oil strike 14 years ago haunting drivers in regions like Valencia and Maracay and the situation is getting worse in Aragua and Carabobo, where people have been forced to endure lineups of more than five hours to fill up a tank. “The thing is the price will go up next week,” explained a disgusted customer. Many petrol stations were already closed to change prices at the pump. The situation does not seem to be any less discouraging in Guarico, Cojedes, Lara, Portuguesa and Yaracuy, it was reported. Aragua Governor Tarek El Aissami has explained that the problems were due to a delay in importing a chemical necessary to processing derived fuel, while sources for the oil workers’ union have said that the Amuay refinery still does not reach full operation capacity after the accident four years ago, while the one at El Palito (Carabobo) has yet to complete some maintenance started earlier this year. Torey Krug Authentic Jersey