Cairn to get 10-year extension for Rajasthan block

The contracts may be extended but only with revised terms and conditions

Cairn India is likely to get a 10-year extension for its license 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 grant of extension to the Production Sharing Contracts (PSC) for small, medium-sized and discovered fields that were 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 5-year extension in case of an oil field and 10 years in case of gas discoveries.

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

At present, the government's profit petroleum ranges from 25 to 60%. In case of Cairn's Rajasthan block, it is 50%.

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

Sources said Cairn block has been kept out of this policy as unlike other discovered fields like Panna/Mukta and Tapti and Ravva, state-owned Oil and Natural Gas Corp (ONGC) is the licensee of the Rajasthan block.

ONGC holds 30% interest in Rajasthan block and is also the licensee. As per terms of the Rajasthan PSC, the block is to return to the licensee after expiry of the term.

Also, ONGC becomes the owner of all facilities once its cost is recovered from sale of crude oil.

While in case of other small, medium and discovered fields, the extension application will have to just come from the operator, in case of Rajasthan block ONGC is to agree to continuation of operations under Cairn and 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 5 years in advance. Also, the proposal should have approval of the Operating Committee, comprising of all partners.

Cairn's Rajasthan license expires in 2020 and as such it will be eligible for submission of the application not earlier than 2015.

DGH will examine and convey its views on technical aspects to Oil Ministry within eight months, after which the government will take 4 months for grant of extension.