Cabinet may take a call on Cairn India’s Barmer extension
A decision on the 10-year-extension for production sharing contract (PSC) of Barmer oil and gas block of Cairn India and state-run Oil and Natural Gas Corporation (ONGC) in Rajasthan beyond 2020 is likely to be taken by the Cabinet.
The government is likely to take up a group of 28 pre-new exploration licensing policy (NELP) exploratory blocks for clearance soon, including the Barmer block. The block, which is also known as Rajasthan block, includes the Mangala, Bhagyam, Aishwariya and Raageshwari oil and gas fields. It is the biggest onshore oil producing project in India and produces about 166,000 barrels of oil equivalent per day, accounting for about 27 per cent of the country’s overall oil production.
In March this year, the Cabinet had cleared the extension of 28 small- and medium-sized discovered fields. According to sources, since the discovered fields have gone to the Cabinet for extension, exploratory blocks too may need Cabinet nod. “We have not yet taken a final call on this. But there is a possibility that the extension of these group of 28 blocks may also go to the Cabinet for clearance. Out of these, about 10-11 are producing fields,” said a source close to the development.
Cairn India holds holds 70 per cent stake in the Rajasthan block, while ONGC owns 30 per cent. The block RJ-ON-90/1 is spread over 3,111 sq km west of Barmer. According to Cairn India, PSC extension of Barmer block would add another 250 million barrels of oil equivalent into its reserves. Last year, Cairn India had approached the Delhi High Court seeking its intervention for an early decision on the extension of PSC, citing that the company is planning for investments worth Rs 35,000 crore post 2020.
The court has asked the government to come up with a decision soon. “A decision can be expected soon. For us it is not just Cairn India but a decision on the group of all the 28 exploratory blocks will be taken together,” the source added. According to the Dharmendra Pradhan-led petroleum ministry, the government should get a 10 per cent higher profit petroleum from the operator in return for the extension. A similar policy was adopted for the extension of 28 small- and medium-sized discovered fields where operators would have to shell higher royalty and profit petroleum during the PSC extension period. Profit petroleum is the main source of revenue for the government from its hydrocarbon blocks.
Reportedly, Cairn India is already going slow on investments with an investment plan of $100 million for exploration and production in this block in FY16, compared to $250 million in FY16. Last week, the Delhi High Court dismissed a plea by Cairn India to export excess crude from its oil field in Rajasthan. The court had cited that according to the PSC between Cairn and the government, the company can seek permission to export crude oil only after India attains self sufficiency in production. The company has claimed that because of selling excess crude to private domestic companies at a lower rate, the government is losing nearly Rs 4.5 crore per day.
