Only part of Barmer block may get production sharing contract extension

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Published: July 23, 2015 1:02:11 AM

Cairn India, which operates India's largest onshore block at Barmer in Rajasthan, may get its lease extended only for certain sections of the block and not the total area.

Cairn India, which operates India’s largest onshore block at Barmer in Rajasthan, may get its lease extended only for certain sections of the block and not the total area. The law ministry has opined that the government could consider extending the production sharing contract (PSC), which is to expire in May 14, 2020, only for the areas where actual production activity has been undertaken and not for the entire block, officials privy to the development told FE.

In this scenario, the government may consider re-auctioning the remaining virgin area of the block. The Barmer block was originally spread over 11,108 sq km, but Cairn gave away a chunk of it and currently retains 3,111 sq km, where it has reported more than a dozen oil and gas discoveries.

“The petroleum ministry sought views from the law ministry if the PSC for areas which are under production could be extended. The law ministry has given its consent in favour of the proposal,” a senior government official said.

In April 2013, Cairn India, which is set to be merged with its parent Vedanta, requested the government to give it back the 7,997 sq km it had given up earlier, citing the reason that the area holds potential and needs to be explored. But petroleum minister Dharmendra Pradhan said that the private explorer’s plea would not be granted.

In all PSCs in force in the country, there are no provisions for restoration of the original contract area after the relinquishment and expiry of the exploration period.

The ministry is cautious that post-merger, the operations may weaken and reduce capital expenditure required for ramping up output from the Barmer block, which contributes 27% of India’s crude oil output.

The Directorate-General of Hydrocarbons (DGH) has asked Cairn India, which holds 70% stake in the Barmer block, to submit a tentative exploration programme for 10 years beyond 2020 as a precursor for the extension of the contract for the block. State-run explorer ONGC holds the remaining 30% of the block.

Currently, the Barmer block consists of three contiguous development areas: DA 1: Mangala, Aishwarya, Raageshwari and Saraswati (MARS) fields; DA 2: Bhagyam, NI, NE and Shakti fields; and DA 3: Kaameshwari West fields. At present, oil is being produced mainly from Mangala, Bhagyam, Aishwariya, Raageshwari and Saraswati fields and from Barmer Hill and satellite fields.

Crude oil output from the Barmer block declined quarter-on-quarter from 174,000 bpd during January-March 2015 to 172,000 bpd in April-June 2015.

Till date, 31 discoveries have been made in the Rajasthan block. The PSC for the project was signed on May 15, 1995. In 1997, Cairn acquired an interest in the block. In 2002, Cairn assumed the role of operator. The block has produced more than 281 million barrels of oil equivalent (mboe) till the end of FY2015.

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