Private explorer Cairn India, which operates the largest onshore crude oil field in India, is seeking free market pricing for oil and gas, early contract extension, cess linked to oil price and production incentive for difficult fields. This time, interestingly, the Vedanta Group company has taken the route of a newspaper advertisement, published in a leading English daily on Friday, to reach out to the government.
The quarter-page advertisement claims that Cairn India is playing a significant role in developing oil and gas resources and making India self-reliant.
Cairn India, which claims to have invested Rs 34,000 crore, has faced rough weather with the government. In June, Cairn India has been proposed to be merged with parent Vedanta Limited. The regulatory clearances for the proposal are awaited. In 2010, when London-based Anil Agarwal announced taking over of controlling stake in Cairn India from its then parent Edinburgh-based Cairn Energy, it had to cross a hurdle dragging into several months. Then UPA government forced the private explorer to reimburse its PSU partner in the Rajasthan block, ONGC, for all royalties the latter had paid on Cairn’s behalf.
Cairn India, which has claimed in the advertisement that its share is close to 30% in domestic oil production and over 80% of value flows to government, is facing a major uncertainty when it comes to extension of its production sharing contract for the Barmer block in Rajasthan. The contract is set to expire on May 14, 2020. Cairn India has submitted its application for contract extension to petroleum ministry on April 5, 2013. However, the government has not yet arrived at any consensus for extension of the same.
The government is set to re-negotiate the fiscal terms after the Law Ministry opined that terms could be re-drawn. Now, the centre would look for bigger pie of revenues from the Barmer block (RJ-ON-90/1).
The petroleum ministry has also shot down a proposal from Cairn India to export crude oil from Barmer block in Rajasthan, saying its production sharing contract (PSC) with the Centre doesn’t provide for sales abroad. The ministry’s decision comes despite the fact that exports could fetch the company $12 per barrel more than domestic sales, which incidentally are at a discount to market prices due to a 2009 government directive.
Cairn India is also seeking to re-negotiate the pricing formula for crude oil from the Barmer block. But in vain, as the petroleum ministry is of the view that it has ‘no direct role to play’ when it comes to pricing of crude oil produced from the biggest onshore field Barmer in Rajasthan. If the explorers want a revision in the pricing formula, they should negotiate with the buyers directly, which is also provided by the production sharing contract (PSC), the ministry feels.
Cairn’s newspaper advertisement has highlighted some achievements including: 300 million barrels production in past six years, Rs 82,000 crore contribution to exchequer and Rs 179,000 crore reduction in India’s crude oil imports, among others.
The private firm has said in the advertisement that India has significant oil and gas potential. Vast areas still remain unexplored. Government’s attractive policies and pro-investment initiatives will bring-in additional domestic investments and FDI.