The ministry of petroleum and natural gas on Thursday told the Delhi High Court that its empowered committee of secretaries has decided against granting permission to Cairn India, subsidiary of UK-based Vedanta group, to export crude oil from its Barmer oil and gas block in Rajasthan.
The company had moved the high court in January seeking directions to the government to permit the oil explorer to export crude oil drilled from the largest onshore area, Barmer. This, Cairn claims, would help it earn a better price as against the current mechanism, where it sells to domestic consumers at discount.
Additional solicitor-general Tushar Mehta told justice Manmohan that the committee met on January 21 and decided that Cairn cannot be allowed to export the excess crude. He said that an affidavit to this effect will be filed before the next date of hearing on February 18.
The petroleum ministry had earlier shot down a proposal from Cairn India to export crude oil from the block, 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 on market prices due to a 2009 government directive. Last week, Cairn India reported a net profit of Rs 9 crore during October-December 2015, a drop of 99% against Rs 1,350 crore in the same months last year, primarily due to lower crude price.
Cairn wants permission to export crude from India’s largest onshore field, arguing that exports could also lead to substantial additional revenue for the state and central governments in terms of royalty, taxes and profit petroleum.
The London-based Anil Agarwal-promoted Cairn India is making desperate moves to earn better revenues amid crude oil prices being bottom out. Meanwhile, the extant production sharing contract (PSC) for the Barmer block would expire on May 14, 2020 and explorer is seeking 10-year extension to it.
In Q3 of FY16, the private explorer got a meagre $34.5/barrel price for the crude oil it drilled from its Barmer block in Rajasthan fields against $68 per barrel in the third quarter of the previous fiscal. Net revenue for Q3FY16 decreased mainly due to a sharp decline of 13% in crude prices and increase in discount (21%) to Brent for Rajasthan crude to $9.2/barrel ($7.2/barrel in Q2FY16).
The company had earlier told the court that it has incurred a loss of R1,400 crore, as the petroleum ministry forced to crude from its Rajasthan oil field to private players at prices 20% less than global rates.
The contention was opposed by the ministry, which had told the court that the loss to the government as calculated by Cairn was “notional” and the company was incurring no loss either, as it was selling the crude not picked up by PSUs or the government to private domestic players.