Big relief: Cairn India’s Barmer oil & gas block among 10 granted extension

By: | Published: March 24, 2017 7:09 AM

The private oil explorer has been seeking extension of the production sharing contract (PSC) for this field, with reserves of 318.31 MMT of oil and oil equivalent of gas, since 2009. The PSC was due to expire on May 14, 2020.

Cairn’s another block — in Cambay Basin with reserves of 29.10 MMT — has also been given extension. (PTI)

In what may come as a relief to Cairn India and encourage it to increase the pace of investment, the Vedanta group company’s prolific Barmer oil and gas block has been granted an extension of 10 years or economic life of the field, whichever is earlier. Extension was also granted to nine other blocks wherein recoverable reserve is yet to be fully exploited. The private oil explorer has been seeking extension of the production sharing contract (PSC) for this field, with reserves of 318.31 MMT of oil and oil equivalent of gas, since 2009. The PSC was due to expire on May 14, 2020. Cairn’s another block — in Cambay Basin with reserves of 29.10 MMT — has also been given extension. The other operators to benefit include GSPC, Essar, ONGC, Focus and HOEC, and the beneficiary states are Rajasthan, Gujarat and Assam.

The government’s step, a formal nod to which was given by the CCEA on Wednesday, is progressive towards achieving the target of 10% reduction in import of oil by 2022, and will help in accelerating and augmenting domestic production of hydrocarbons from the existing blocks.

Petroleum minister Dharmendra Pradhan recently urged explorers to use enhanced oil recovery techniques to increase production. The country imports around 80% of its energy needs and according to the International Energy Agency, India’s demand for oil in 2014 at 185 MTOE was next only to the US and China. This demand is expected to go up to 401 MTOE by 2035.

However, during the extended PSC duration, explorers will be required to pay 10 percentage points more over the existing rate of government’s share of profit petroleum. The existing rate ranges between 35% and 55%, and varies across fields as per the PSC.

Between 1991 and 1995, 28 exploration blocks of ONGC and Oil India were auctioned under the pre-NELP regime to attract private and foreign investment. Out of the 28 blocks, 10 blocks which have been given extension are operational and the rest have been relinquished. Out of these 10 blocks, six blocks are under production, for two filed development plans have been submitted, and two are under exploration.

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The government is expecting 58 MMT of oil equivalent to be extracted during the PSC extension period which will be worth around R1.12 trillion, and the companies are expected to invest around $5.43 billion in these 10 blocks. Through the PSC extension, the government is expecting to expedite production and improve investment climate.

The Delhi High Court is at present hearing a case filed by Cairn India regarding extension of its contract for the Barmer oil and gas block in Rajasthan. The firm is also seeking a better price for crude oil produced from the block. The next date of hearing is March 31.

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