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Govt framing policy for contract extension of oil & gas blocks

Cairn India, controlled by billionaire Anil Agarwal, is seeking to extend the contract to operate

Policy Pulse
Publish Date: Oct 24 2016 6:43PM | Updated Date: Oct 25 2016 6:56PM

Govt framing policy for contract extension of oil & gas blocks

The government is framing a policy that will guide Cairn India’s request for renewal of contract to operate its prolific Barmer oil and gas block, as well as 27 other energy blocks, lifting uncertainty around contract extensions that forced a legal tussle between the Vedanta group firm and the government. 

 

Cairn India, controlled by billionaire Anil Agarwal, is seeking to extend the contract to operate the oil and gas block in Barmer, Rajasthan, by 10 years after the initial 20-year agreement runs out in 2020. Cairn, which controls about a quarter of the country’s crude output, has been urging the court for several months now to force a deadline on the government for deciding on the issue. 

 

An oil ministry official said that instead of taking a company-specific decision for Cairn India, the government has decided to frame a policy that will guide the contract extension in 28 blocks, including that of Barmer. This group of 28 blocks, the official said, is referred to as the Pre-NELP ‘exploration’ blocks, or the blocks that were auctioned before the NELP, or New Exploration Licensing Policy, came into being. 

 

In March, the cabinet had approved a renewal policy for Pre-NELP ‘discovered’ fields that also applied to another set of 28 small- and medium-sized discovered fields. Under this policy, the government’s share of profit petroleum during the extended period of contract shall be 10% higher than the share during the initial period. During the extension, the royalty and cess shall be payable at the prevailing rates by all the contractors in proportion to their participating interest. The policy also outlined guidelines on pre-requisites for grant of extension, criterion for evaluation of a request, a time-frame for consideration of a request, duration of extension, seat of arbitration, etc. 

 

The oil ministry official, who did not want to be named, did not say if the new policy being considered for the Pre-NELP exploration blocks will be a copy of the policy announced in March. He said the terms and conditions are still being contemplated. 

 

The terms for extension are at the heart of the delay with both the government and the contractor, Cairn India, trying to extract a larger share of profit for itself in the new contract.