Cairn India's Raj oil fields may return to ONGC if term not extended

May 25 2014, 21:17 IST
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The Rajasthan PSC provides for a 5-year extension beyond 2020. The Rajasthan PSC provides for a 5-year extension beyond 2020.
SummaryONGC pays royalty on not just its 30 pct stake, but also on Cairn India's 70 pct interest.

as high as 80 per cent.

Sources said ONGC after taking over the block can engage global expertise from international companies, including Cairn for operating the fields at terms beneficial to it.

When contacted, a Cairn India spokesperson said, "The PSC for Rajasthan block has a provision for extension beyond 2020 and our request is currently being examined by government."

"The Rajasthan block is a proven and highly prolific oil and gas province, and more recently the gas prospectivity has been established. We believe that there are compelling reasons to not only award a 10-year extension, which the PSC already provides for, but in fact up to field life," he said.

The joint venture of Cairn and Oil and Natural Gas Corp (ONGC), which currently produces around 180,000 barrels per day of oil from Rajasthan, is investing USD 3 billion over next 3 years to sustain this output and increase the same.

The fields production touched 200,000 bopd in March for a brief period, and has subsequently reduced to around 180,000 bopd. The Directorate General of Hydrocarbon (DGH) too has recommended for a 5 year extension as provided in the PSC.

Originally, the Rajasthan block RJ-ON-90/1 was awarded to Royal Dutch Shell in pre—New Exploration Licensing Policy (NELP) round in 1992 and a PSC was signed on May 15, 1995. Cairn between 1998 and 2002 bought out Shell in the block.

"We are confident that the government will provide necessary extensions that ensure maximum production for the country, thereby reducing crude oil imports and saving precious foreign exchange," the Cairn spokesperson said.

He said effective exploration and long-term extension of the PSC will naturally result in higher level of reserves and resources, thereby resulting in enhanced production of crude oil and natural gas and securing the growing energy needs of our country.

However, the key remains with ONGC who has to agree to the extension, which may be against their economic interest, as some in the company said.

The savings on imports and the economic benefits to the country will continue from this prolific project no matter who operates or owns the project, they added.

"As we have indicated the PSC for Rajasthan block provides for extension beyond 2020. We are confident that the right step in the interest of all stakeholders will be taken by the government that will allow current scale of efficient operations to continue, resulting in

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