The shares surged 4.8 percent to 895 rupees, the sharpest increase since May 27 at the close in Mumbai. The stock is the biggest gainer in the 30-stock benchmark S&P BSE Sensex, which rose 1.8 percent. State-run gas producers Oil & Natural Gas Corp. (ONGC) gained 4.5 percent and Oil India Ltd. (OINL) 2.8 percent.
The Cabinet yesterday allowed Reliance and its partner BP Plc (BP/) to charge a higher price for the gas they sell from the KG-D6 block off India’s east coast, according to Oil Minister Veerappa Moily. The decision ended months of debate over Reliance’s eligibility to increase prices after the Cabinet had approved the move in June.
“The uncertainty over Reliance’s ability to increase gas prices has now gone and that’s a big weight off,” said R.K. Gupta, the New Delhi-based managing director at Taurus Asset Management Co. “This has given investors confidence across the board and the entire market seems to be reacting to this news.”
Gas production from the KG-D6 block has slumped to about 10 million cubic meters a day from more than 60 million in 2010. The company says output has dropped because the reservoir is more difficult to produce from than it initially estimated. The Directorate General of Hydrocarbons, the oil ministry’s exploration unit, has said Reliance hasn’t drilled as many wells as it had promised.
Reliance will need to give a bank guarantee, which will be encashed by the government if it is proved that the company deliberately reduced production from the block in the Bay of Bengal, Moily told reporters in New Delhi today. The oil and law ministries will work out the amount of money Reliance needs to guarantee, he said.
To contact the reporter on this story: Rakteem Katakey in New Delhi at email@example.com
To contact the editor responsible for this story: Jason Rogers at firstname.lastname@example.org