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Cairn oil & gas dispute: Govt will resolve issue without impacting oil flow

Kuwar Singh/Richa Mishra New Delhi | Updated on February 08, 2021

Centre hopes to get higher share of profit, $520-million dues before extending contract

Learning from the Cairn Oil & Gas dispute, the Ministry for Petroleum & Natural Gas wants to plug all avenues of challenges to ensure that domestic oil and gas exploration and production activities are not impacted.

Vedanta’s Cairn Oil & Gas had, in October 2018, got a 10-year extension for the Barmer fields, Rajasthan, 25-year contract which was to expire on May 14, 2020. But, this was subject to the company agreeing to raise by 10 per cent the government’s share of profit from the production. But Cairn has contested this.

“Internally, we are trying to see how to best resolve this. Such situations may arise in other cases also and we cannot hamper the work,” a senior official said.

Contract extension

Also, the contract extension is dependent on the resolution of a $520-million cost recovery dispute. The Government wants the company to pay it the due. Pending resolution, the Ministry first gave the company a three-month extension of the production-sharing contract (PSC) till August 15, 2020. It subsequently extended the PSC by 15 days and then by a month till September 30, 2020. Again the company got a three month extension till January 31, 2021.

Vedanta’s stand

Sunil Duggal, Group CEO, Vedanta Ltd, told BusinessLine: “Barmer is the most prolific oil production site discovered in India in the last two decades. We have been able to script a success story in Barmer that adds to India’s energy security mission. An extension to the PSC in existing terms will help us invest more and continue to generate value for the region and the nation. The block contributes more than 50 per cent of its revenue to the GoI as compared to imported crude oil. We are hopeful to have a resolution soon for the extension.”

Currently, Vedanta’s Cairn O&G assets are producing 160 kboepd (thousand barrels of oil equivalent per day) and with the support of the government, Cairn can enhance its production to ~300 kboepd. We stand with the government in their endeavour to lead India towards Atmanirbhar Bharat and look forward to collaborating to achieve our PM’s vision of reducing crude oil import dependency by 10 per cent by 2022.”

Multiple litigations

The Ministry official added, “We are trying to find a way out. One thing is very clear that we do not want to create hurdles in the ongoing work because that field is in production. We do not want to create a situation where we hamper the working. So we are giving them all approvals. We have told them that they can make further investments but at their own risk.”

“We have filed a case before the Delhi High Court where we have asked for our dues to be securitised. That is going on. Vedanta has also filed a case in the high court in which arbitration is going on. Interim order of arbitration has been challenged in high court. There are multiple litigations going on. They have dues, so we cannot close our eyes on that either,” the ministry official added.

Legal course

But the Ministry also does not want to hamper the production as it is well aware that if it tries to take over the field and get someone else to do it, production will get derailed for 1-2 years. Contractors have a right, if they want to get into the legal system to dispute the dues that the government has asked them to pay.

“We cannot take away those rights. On the other hand, we also cannot have a situation where we think they have government dues which they have not paid, because our policy says that they should clear the government dues. Looking at both these aspects we have taken the legal course. But the legal process is taking some time. That’s why we have been giving them extensions so that they are not disturbed, and work goes on in the meantime. At the same time, we want some relief from the court,” the official elaborated.

Published on February 07, 2021

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