Prospects of Cairn India getting a 10-year extension for its prolific Barmer oil and gas block beyond 2020 have brightened with the Rajasthan government pushing for it. Sources told FE that chief minister Vasundhara Raje has written to petroleum minister Dharmendra Pradhan requesting an extension of the production-sharing contract (PSC). This would facilitate drilling beyond 1.75 lakh barrels of oil per day (bopd) at an investment of $4 billion.
The PSC for the Barmer block, which contributes 27% to the country’s crude oil output, is set to expire on May 14, 2020. Cairn submitted its application for an extension to the petroleum ministry in early April.
Raje is understood to have pointed out that an extension was essential to keep exploration going and ensure an increase in output. Cairn India has said exploration was successful in nine out of 12 wells drilled last year. It said it has discovered 183 million barrels of oil equivalent (boe) in Rajasthan since exploration was resumed and that there is the possibility of drilling another 166 million boe.
Cairn India ended FY15 with an average crude oil output of 173,649 bopd, down 4% from 180,316 bopd in FY14. FE had earlier reported that the ministry of petroleum and natural gas is finally considering extending the PSC for the Barmer block by 10 years and not just five years. However, the government is set to renegotiate the fiscal terms after the law ministry opined that terms could be redrawn.
The Centre may want a bigger share of the revenues from the Barmer block (RJ-ON-90/1). Pradhan was not immediately available for comments on the issue.
Earlier, the Directorate General of Hydrocarbons had turned down Cairn’s request for a 10-year extension of the PSC for the Barmer block, saying only a five-year extension could be given since Barmer is primarily oil-producing and not a gas field, in which case the PSC could have been extended by another 10 years.
Cairn India is believed to have found gas reserves of around 3 trillion cubic feet in a gas field — Raageshwari — in the south of the Barmer block. Gas from the field is currently processed at Raageshwari gas terminal about 80 km from the crude oil processing terminal known as Mangala processing terminal.