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Oil explorer Petro Matad said it had postponed the drilling of a well in Mongolia after a provincial government challenged its land-use rights.
The first casing point of the Heron-1 well had been reached at 551 metres on schedule.
'However, the provincial government has challenged Petro Matad's legal right to use the land at Heron-1 on the basis that a tripartite agreement between two central government agencies and the province has not been executed,' the company said.
'In all of Petro Matad's operations the Company has followed the land permitting regulations as required under the production sharing contract and in accordance with instructions from the Ministry of Mining and the industry regulator MRPAM.'
'The absence of a tripartite land use agreement between government agencies has never previously been an issue.'
'We are working with the Ministry, MRPAM and the provincial government to remedy this situation as soon as possible.'
The rig at Heron-1 had been put on standby whilst the situation was resolved.
Daily standby costs were 'low by industry standards' and were of the order of $12,000.
Petro Matad said it had also started drilling another well in Mongolia.
The Red Deer-1 exploration well in the Asgat Sag Basin of Block XX in eastern Mongolia was being drilled with the Daton Petroleum Engineering and Oilfield Service LLC rig, DXZ1.
It was targeting a prospect with 48m barrels of mean prospective recoverable resource and would be drilled to a total depth of 2,100 metres.
Red Deer-1 was expected to take up to 35 days to complete.
In the event of a discovery, the company said it would bring in a separate rig for testing.
At 8:35am: (LON:MATD) Petro Matad Ltd share price was 0p at 7.9p