To get a 10-year extension for Barmer oilfields in Rajasthan, Cairn India will have to convince the Petroleum and Natural Gas Ministry on the gas prospects in the acreage.
Although the Rajasthan production-sharing contract (PSC) is valid till May 14, 2020, the joint venture comprising Cairn India and state-run Oil and Natural Gas Corp (ONGC), has approached the ministry seeking extension as part of its future investment plan.
The contractor will not have any problem in getting a five-year extension, as the Rajasthan block (RJ-ON-90/1) PSC prescribes for an initial extension of five years on a general merit basis, a senior Petroleum Ministry official said, requesting anonymity.
He added the 10-year extension is allowed if the gas sales profile from the block is extending beyond 2020.
The contractor is also eligible for a subsequent indefinite extension.
“We would like Cairn to show this (gas) prospect,” the official said. Cairn is likely to make a presentation before the ministry in the next couple of days.
The Anil Agarwal-led company has been saying the Government should consider the Barmer oilfields contract in line with those signed under the hydrocarbon auction rounds under which contracts are valid till the life of the field.
In fact, Agarwal, Chairman of the Vedanta Group, recently met senior ministry officials and sought an early decision.
P Elango, CEO of Cairn India, had told Business Line the Barmer block has the economic production potential much beyond the term of the contract (beyond 2040), while the Rajasthan PSC term is valid till May 14, 2020.
The urgency to get the approval is because huge investment is at stake.
The issue of extension does not arise in the contracts signed under the New Exploration Licensing Policy, but for blocks given prior to auction rounds. NELP contracts do not have any ‘specific term’ for their validity, and, hence, continue to be in force as long as the commercial production lasts.
Currently, Cairn and its partner ONGC are producing 190,000 barrels of oil equivalent per day (oil and some gas) from the Barmer oilfields and want to close this fiscal with 200-215,000 boepd.
According to the company, the total resource base supports a vision to produce 300,000 boepd (equivalent to a contribution of more than 35 per cent of India’s current domestic crude production), subject to further investments and regulatory approvals.
Cairn acquired a 100 per cent stake in the block from Shell in 2002, which had signed the contract in 1995.
After the first oil discovery was made in 2004, ONGC came in as a partner. Today, Cairn holds 70 per cent and ONGC the remaining 30 per cent in the block.