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OCT 25 2016

Cabinet likely to take a call on Cairn India's Barmer extension

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 25th OCT 2016

A decision on 10-year extension for the production-sharing contract (PSC) of the 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.

According to sources, the government will take up a group of 28 pre-NELP (New Exploration Licensing Policy) exploratory blocks, including the Barmer block, for clearance soon. The block, also known as Rajasthan block, includes the Mangala, Bhagyam, Aishwariya and Raageshwari oil & gas fields. It is the biggest onshore oil-producing project in India, producing about 166,000 barrels of oil equivalent per day, accounting for 27 per cent of the country’s overall oil production.

The Cabinet had cleared the extension of 28 small and medium-sized discovered fields in March this year. According to sources, since the discovered fields were taken up by the Cabinet for extension, exploratory blocks, too, would need Cabinet nod. “We have not yet taken a final call on this. But, there is a possibility that the extension of these 28 blocks might also go to Cabinet for clearance.

Out of these, 10-11 are producing fields,” said a source close to the development.  Cairn India holds a 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, the 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 the PSC, saying the company is planning for investments worth Rs 35,000 crore after 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. Profit petroleum is the revenue remaining after the operator has recovered its cost, which is shared with the government based on a formula. A similar policy was adopted for the extension of 28 small and medium-sized discovered fields where operators would have to shell out 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.

The company is reportedly 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 oilfield in Rajasthan. The court had cited that according to the PSC between Cairn and the government, the company can seek the permission to export crude oil only after India attains self-sufficiency in production. The firm had claimed that because of selling excess crude to private domestic companies at a lower rate, the government is losing nearly Rs 4.5 crore daily.




Delhi Rajasthan Gas Cairn India Natural Gas New Exploration Licensing Policy Oil ONGC Hydrocarbon Shell United States New Exploration Licensing Policy Petroleum Oil and Gas barmer Crude Oil India ongc

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