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Reliance loses exploration arbitration

Player hit with penalty for not completing work programmes

Reliance Industries has lost to the Indian government in arbitration on the amount of the penalty due for the private sector player not completing committed exploration work on four oil blocks.

Reliance had disputed the amount demanded of US$26 million in this protracted legal wrangle but the hearing found in the government’s favour.

The case related to four blocks - KG-OSN-97/3, KG-OSN-97/4 and MB-OSN-97/3 off India’s east coast and Block GK-OSN-97/1 in the western part of the country, according to the Economic Times.

The government is said to have initially wanted around $90 million from Reliance for failing to carry out its seismic and drilling commitments on the four blocks but upstream regulator, Directorate General of Hydrocarbons, reckoned $26 million was more appropriate.

The Indian operator is understood to have actually paid this amount but had been hoping that a favourable arbitration outcome would have enabled it to recover some of the monies.

Reliance had been awarded the four blocks under India’s New Exploration and Licensing Policy (or NELP), the terms of which allow the government to recover as a financial penalty an amount equal to the unfulfilled commitment work programme.

Reliance could not reached for immediate comment.