$6.5-bn worth oil waits as govt sits on Cairn PSC

Jan 16 2014, 01:21 IST
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Cairn has sought from the oil ministry an extension of the Ravva block PSC. Cairn has sought from the oil ministry an extension of the Ravva block PSC.
SummaryDelay could upset the energy major’s $1-bn investment plan.

soon submit a field develop plan (FDP) to the Directorate General of Hydrocarbons (DGH) to monetise a further 4.3 mbbl of crude oil and 17.7 bcf of gas found in four pools of the block.

If Cairn goes ahead with developing the additional 65 mboe of resources, this would be part of its sixth phase of drilling.

Up to March 31, 2013, Cairn had invested about $1.42 billion on the block and the government’s share of earnings stands at 72% (including royalty, tax, etc). In the July-September quarter, the block produced 29,151 barrels of oil equivalent per day, recording a 3% quarter-on-quarter growth with 15 oil wells, 4 gas wells and 9 water injection wells. In Ravva, the monetisation strategy consists of drilling a deep exploration prospect, evaluation of other deep prospects, development of contingent resources and an infill drilling campaign based on 4D seismic data, among others

The DGH has recommended to the oil ministry that PSCs expiring in the next few years be extended by 10 years or till the economic life of the field is over.

The extension, the regulator recommended, should come with a rider — that the companies contribute a 5 percentage points higher share of profit petroleum to the government from revenues earned on the fields for which the leases are extended beyond the original contract date.

The profit to be shared with the government differs based on the investment multiple. If the multiple is less than 1.5, for instance, the government's share of profit petroleum is 15% at present, and the DGH has proposed that this be raised to 20%.

The PSCs slated to expire between 2019 and 2025 include Cairn India's prolific Barmer fields in Rajasthan and the Panna Mukta Tapti fields held by ONGC, BG and RIL, expiring in

2020 and 2019, respectively. Some of the other operators seeking extension include HOEC for its Asjol field expiring on 2021, Oilex for the Cambay field expiring in 2020, Selan for the Indora and Lohar fields, both expiring in 2020, and Niko for its Hazira field, which has a 2019 due date.

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