• Cabinet approves policy for extension of oilfields contracts to attract $5.4 billion investments

    The Union cabinet chaired by Prime Minister Narendra Modi today approved a new policy that allows extension of Production Sharing Contracts (PSCs) governing exploration blocks awarded in the pre-New Exploration Licensing Policy (NELP) regime before 1999.

    “During the extension period, the contractors are expected to make an additional investment of more than $5.4 billion,” said an official statement, adding the recoverable reserves from these blocks are estimated to be more than 426 million barrel of oil equivalent.

    The decision comes as a major positive for Vedanta-owned Cairn India Ltd that operates India’s largest onland block at Barmer in Rajasthan. The 25-year lease period for the block — RJ-ON-90/1—expires in May 2020. The contract provides for a mutually-agreed 10-year extension if gas is being produced commercially. Commercial production of gas from the field commenced in 2013.

    Cairn India holds a 70 per cent stake in the Rajasthan block while ONGC owns 30 per cent. The PSC extension of the block has the potential to add another 250 million barrels of oil equivalent into its reserves. The company had earlier approached the Delhi High Court seeking its intervention for an early decision on the extension of the PSC. The court has asked the government to come up with a decision soon.

    Based on the new policy, the government’s share of Profit Petroleum – proceeds from the sale of hydrocarbon that the company shares with government — during the extended period of contract would be 10 per cent higher for these fields, thus bringing additional revenues to government. In addition, the policy brings out detailed guidelines regarding grant of extension, criteria for evaluation of request, time-frame for consideration of request and the duration of extension.

    “This policy will enable the contractors to extract not only the remaining reserves but also plan to extract additional reserves by implementing new technologies. In certain fields, additional recovery of hydrocarbons can be obtained through Enhanced Oil Recovery or Improved Oil Recovery (EOR/IOR) Projects and as such the production would extend beyond the current duration of PSC,” the official statement read.

    Oil and gas blocks allotted in the pre-NELP regime produced around 55 million barrel of oil and 965 million standard cubic meter (mmscm) of natural gas in the current financial year between April 2016 and February 2017. Mark Messier Jersey

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