PSU explorer ONGC, which holds 30% stake in the Barmer oil and gas block in Rajasthan, wants the extant contract to be extended post its expiry in 2020 without any changes. This, according to analysts, brightens the prospects of Cairn India, which holds 70% of the block and is the operator, getting the lease extended by another decade.
The production sharing contract (PSC) for the Barmer block, which contributes 27% of country’s crude oil output, is set to expire on May 14, 2020. Cairn India submitted its application for contract extension to the petroleum ministry on April 5, 2013. However, the petroleum ministry is yet to decide on the issue.
“Earlier, ONGC said that it wants the contract to be negotiated. But now it doesn’t want it to change. Both the views have been approved by the ONGC board. This has delayed the government’s decision on extension,” an official privy to the development told FE. On January 21, the board of state-run PSU explorer ONGC decided not to object to Cairn India retaining the prolific Barmer oil assets beyond 2020.
Cairn India ended FY15 with an average crude oil output of 173,649 barrels per day (bpd), down 4% against 180,316 bpd in FY14. FE had earlier reported that the ministry of petroleum and natural gas is finally considering extending the PSC for the Barmer block in Rajasthan by 10 years and not just five years.
Recently, Vasundhara Raje, chief minister of Rajasthan, wrote to Dharmendra Pradhan, petroleum minister in the NDA government, urging his ministry to extend the PSC, which would facilitate the drilling of hydrocarbon in the field beyond 1.75 lakh bpd and entail investments to the tune of $4 billion. Raje said that an extension is essential to keep the exploration activities continuing and ensure an increase in output.
The London-based, Anil Agarwal-promoted explorer has said that nine of 12 exploration wells drilled in FY15 encountered hydrocarbon, which opens up a new play type. It has discovered 183 million barrels of oil equivalent (boe) in Rajasthan since the resumption of exploration, with a further 166 million boe prospective drilled and awaiting testing. At present, five oilfields in the Barmer block — Mangala, Bhagyam, Aishwarya, Raageshwari and Saraswati — produce about 180,000 barrels of oil per day.
In March 2013, Cairn India started the commercial sale of gas as well. In FY15, Cairn India’s gross contribution to the exchequer stood at R19,047 crore.
