Covid-19: Cairn invokes force majeure on exploration; seeks relief in OALP

The ongoing countrywide lockdown, implemented to contain the spread of Covid-19, has hit the plans of Cairn Oil and Gas, compelling the country’s largest private sector oil producer to approach the government to invoke the force majeure clause. The company wants an extension of timelines for the blocks it won under the Open Acreage Licensing Policy (OALP) rounds.
 

Cairn has bagged 41 blocks under the OALP Round I auction and five blocks each under Round II and Round III since 2018. In addition, it has also got two areas under Round II of the Discovered Small Field (DSF) policy. These blocks are spread across Andhra Pradesh, Assam, Tamil Nadu, Tripura, Rajasthan, Maharashtra, and Gujarat. According to a government source, not just the Vedanta arm, but several companies under the OALP and DSF rounds have also invoked force majeure.
 

“Cairn has sought an extension of OALP exploration timelines because the lockdown has caused the stoppage of seismic surveys and related activity. This is in addition to delays in issuance of petroleum exploration licences (PEL) and environmental clearances,” said a source close to the development.

Since December, several companies have been in a spot as seismic equipment got stuck in China and other countries owing to the Covid-19 outbreak. Cairn got a mining lease for a couple of blocks, while seismic surveys were being initiated in some blocks in Assam, Gujarat and one of the offshore areas.

According to sources, other companies that have invoked force majeure are Mumbai-based Oilmax Energy and Dubai-based South Asia Consultancy FZE. They want an extension of timelines to meet various commitments under the exploration stage.
 

“The delay in seismic works means prospect identification, drilling, and appraisal too will get delayed. Coronavirus and lower crude and natural gas prices are making the exploration and production business unviable,” said an industry source.
 

A total of 94 blocks, covering an area of 136,790 square kilometres, were awarded under the four OALP bid rounds to leading exploration and production companies. The operators of these blocks have initiated petroleum exploration activities or are in the final stages of obtaining petroleum exploration licenses.
 

“We are approaching the government for a force majeure. If deadlines are extended, we will get sufficient time to compensate for the lockdown. After the lockdown also, it will take at least one quarter for operations to normalise. Services which we are looking will not open up as some of them are from China,” said D S Rajput, managing director of South Asia Consultancy, the only foreign company that won a block under DSF.
 

The Directorate General of Hydrocarbons (DGH) has extended the time period for submission of bids under the OALP’s Round V. The DGH has also merged the sixth and seventh rounds of the OALP for oil and gas blocks, owing to the lockdown.