• Brokerages eye govt’s next move after AP Shah committee report to guage impact on RIL

    Amid the excitement and analysis of Reliance Industries’ rollout of Jio broadband services, analysts are also closely watching the government’s next move after the AP Shah Committee said the company made “unjust” gains by pumping natural gas that flowed from ONGC’s adjoining block in the Krishna-Godavari basin.

    On August 31, the AP Shah Committee report accepted the consultant’s report on the dispute over migration of gas from ONGC’s blocks to RILs block in the eastern coast.

    The one-man committee headed by former Chief Justice of Delhi High Court Ajit Prakash Shah states the compensation for the gas that migrated should go to the national exchequer and also made recommendations to avoid such disputes in future.

    The government’s action is awaited. “This is unprecedented in India so we will have to wait and watch how government reacts to it. Prima facie, it looks like RIL may have to compensate the government for the gas that came from ONGC’s block. But whether the migration of gas was an unforeseen act of nature or whether the two companies allowed it to happen with knowledge of it is yet to be determined,” an energy expert tracking the development closely said.

    Between April 1, 2009 and March 31, 2015, as much as 11.122 billion cubic meters of gas migrated from ONGC’s Godavari-PML and KGDWN-98/2 blocks to adjoining KG-D6 that are in RIL’s control.

    At current prices, this gas would be worth around Rs 11,000 crore.

    The government then set up the AP Shah committee to study the findings of the independent expert DeGolyer & MacNaughton (D&M) that established reservoir continuity between the KGD6 and contiguous ONGC operated blocks. “In our view, quantifying any impact on RIL as of now is difficult and so is trying to freeze a timeframe for final resolution. Broadly, we do not see this entire issue (AP Shah Committee recommendations on gas migration) as having any material impact on RIL,” JP Morgan said in a report.

    The brokerage said it will watch out for the government’s decision pertaining to monetary claims from RIL and whether it includes any penalty and does it take into account any operating expenses and capital expenses.

    While RIL head Mukesh Ambani refrained from commenting on the issue at the company’s Annual General Meet, sector experts expect the company to opt for legal route to challenge monetary claims.

    RIL has invested about Rs 40,000 crore in developing wells in the Krishna-Godaveri basin, where it had expected reserves of 10 trillion cubic feet but it witnessed a steep fall in output. Billy Turner Jersey

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