The Delhi High Court on Monday gave the government six months to take a decision on extending Cairn India’s production sharing contract (PSC) for the Barmer oil fields in Rajasthan.
Observing that the government cannot keep the issue hanging and has to expedite its decision, Justice Rajiv Endlaw granted three months for ONGC and Cairn together to come at a consensus for providing the documents on commercial viability and post that the government will have three months to decide.
Meanwhile, the High Court in another Cairn’s plea sought the Ministry of Petroleum and Natural Gas and the Directorate General of Foreign Trade’s response on whether it would buy the excess “sweet” crude, containing higher levels of sulphur, produced by Cairn India’s from the country’s largest onshore oil discovery in Barmer and if not, can the company export it.
Cairn India, a subsidiary of UK-based Vedanta group, in its plea said that it was being forced to sell the sweet crude to domestic private players at a much lower price than global rates.
Senior counsel CA Sundaram, appearing for Cairn India said, the contract for Barmer oilfields may expire in 2020, but the company has plans to invest Rs 300 billion in the oilfield in next few years, which makes it necessary for the company to get a confirmation on extension of the contract.
He said that the government does not have the option of not renewing the contract and there is a clause that said the government “shall” extend the contract if commercial production of oil starts in the block.
Cairn further said that commercial proposal requirements were irrelevant as it has technically satisfied ONGC.
Cairn, which produces 1,76,000 barrels of oil every day, sought a 10-year extension for its PSC for which the commercial operations began in 2009. It said that $10 billion investment is hauled up due to government’s indecision and extension of PSC was mandatory as commercial production has already begun.
However, ONGC, a partner in exploration from Barmer fields, termed Cairn India’s plea as “immature.” It said that it is the government’s prerogative to decide price of production, for which it needs to be given reasonable time to decide. Counsel KR Sashiprabhu, appearing for ONGC, said that it required more inputs from Cairn on project viability.
Opposing Cairn’s plea, the government argued that it had not taken a decision on the issues as it needed both ONCG and Cairn to come at a consensus and an endorsement from ONGC on commercial viability is required before granting any extension.
According to the government, Cairn has not supplied enough documents with regard to certain details like quantum of reserve and period for extraction.