The Telegraph
Wednesday , August 6 , 2014
CIMA Gallary

Licence extension hope for Cairn


New Delhi, Aug. 5 (PTI): Cairn India is likely to get a 10-year extension for its licence to explore and produce oil and gas from the prolific Rajasthan block but may have to pay more profit petroleum to the government to get a term beyond 2020.

A committee headed by the Directorate General of Hydrocarbons (DGH) on policy for the grant of extension to the production-sharing contracts (PSC) for small, medium-sized and discovered fields awarded to private firms in 1990s has recommended a uniform 10-year extension but on revised terms and conditions.

The panel has recommended that contracts may be extended for 10 years for both oil and gas fields, or the balance economic life of the field, whichever is earlier, but with revised terms and conditions, sources said.

The current PSCs provide for a five-year extension in case of an oilfield and 10 years in case of gas discoveries.

It recommended a minimum 50 per cent government share of profit petroleum from small fields and 60 per cent in case of medium-sized fields.

The government’s profit petroleum ranges from 25-60 per cent. In case of Cairn’s Rajasthan block, it is 50 per cent.

Cairn’s Rajasthan block is not among fields for which the committee has recommended the extension policy but the same principles are likely to be used for it as well, they said.

Sources said the Cairn block had been kept out of this policy as unlike other discovered fields such as Panna/Mukta and Tapti and Ravva, state-owned Oil and Natural Gas Corporation is the licensee of the Rajasthan block.

ONGC holds a 30 per cent interest in the Rajasthan block. Under the terms of the Rajasthan PSC, the block is to return to the licensee after the expiry of the term. Also, ONGC becomes the owner of all facilities once its cost is recovered from the sale of crude.

In case of other small, medium and discovered fields, the extension application will have to just come from the operator. However, for the Rajasthan block, ONGC has to agree to the continuation of operations under Cairn on mutually agreeable terms.

Sources said the panel recommended that applications for extension of contract should be made at least two years in advance of the expiry of the contract but not more than five years in advance. Also, the proposal should have the approval of the operating committee, comprising all partners.

Cairn’s Rajasthan licence will expire in 2020 and as such it will be eligible for submission of application not earlier than 2015.

The DGH will examine and convey its views on technical aspects to the oil ministry within eight months, after which the government will take four months to grant the extension.