Barmer: Govt looks to milk Vedanta for millions more

Richa Mishra/Twesh Mishra New Delhi | Updated on September 16, 2018

Talks on over ‘profit petroleum’ as company seeks 10-year extension

Anil Agarwal’s Vedanta Ltd may have to fork out a few million dollars more to get an extension as the operator for its most prolific oil and gas producing asset in Barmer, Rajasthan.

The Rajasthan production-sharing contract (PSC) is valid till May 14, 2020. Cairn Oil & Gas, a vertical of Vedanta Ltd, and the Ministry of Petroleum & Natural Gas as well as the Directorate General of Hydrocarbons (DGH) are currently negotiating the terms of the contract for an extension.

Multiple sources told BusinessLine that during the negotiations, it was felt that the operator will have to fork out the additional amount as part of profit petroleum that it has paid to the government for the previous years. The sources sought to downplay the figures involved, but some of them indicated that it could be more than $10 million.

In fact, the Comptroller & Auditor General (CAG) had in its 2014 report observed: “Though the PSC stipulated that transportation cost beyond delivery point would be borne by the buyers, the operator incurred $8.87 million towards shipping of crude to Mangalore Refinery and Petrochemicals Ltd and Reliance Industries Ltd beyond (the) designated delivery point (Kandla) and adjusted it from the revenues. This adjustment resulted in short payment of Profit Petroleum to the Government by $1.77 million.”




Meanwhile, DGH sources said that during the meeting and thereafter, the Ministry had highlighted some audit-related discrepancies.

“This calculation by the auditors may prove to be a bonanza for the government,” said an industry tracker.

Some differences

The government and the operator have had differences over the terms of the contract. While the government wants the fiscal terms to be reworked — to provide for almost 10 per cent higher share of profit petroleum — in order to extend the contract, the company wants it under the existing terms. The dispute reached the Delhi High Court; the Court struck down the Centre’s demand and directed the government to extend it on the terms sought by the operator. The Centre has gone in appeal against the order.

Sources associated with the company said, “It is not a question of payment; all we want is to continue with the work. We have already made investment plans.”

10-year extension sought

Incidentally, the contractor would not have had 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. But the company is seeking a 10-year extension.

While the negotiations are still on, the company proposes to go ahead with a planned investment of $2.5 billion in its Barmer asset to enhance production. As it continues to sort out the issues in respect of Barmer, it continues its strike rate in the country’s oil and gas exploration business. On September 13, it notified its block KG-OSN-2009/3 in Krishna Godavari Basin. The company has also bagged 41 of the 55 blocks that were on offer under the Open Acreage Licensing Policy.

Published on September 16, 2018

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