KOLKATA (miningweekly.com) – The Indian government has granted a ten-year extension to Vedanta’s contract for exploration and production at the Barmer oil and gas block in the central state of Rajasthan, possibly signalling the end of litigation between the company and government.
"The government, acting through the Directorate General of Hydrocarbons, under the Petroleum and Natural Gas Ministry, has granted its approval for a ten-year extension of the production sharing contract (PSC) for the Rajasthan Block, RJ-ON-90/1," the company said in a regulatory filing on Tuesday.
Vedanta’s 25-year contract for exploration of production from the Barmer oil and gas fields through its now merged entity, Cairns India, was up for renewal in May 2020.
The latest renewal of the PSC will be for another ten years effective from May 2020 when the existing contract expires.
In the filings, Vedanta said, “the extension has been granted by the government pursuant to its policy dated April 7, 2017, for extension of pre-new exploration licensing policy (pre-NELP) exploration blocks PSCs subject to certain conditions.”
The government last year approved a new policy for extension of PSCs that provided for an extension beyond the initial 25-year contract period only if companies operating the fields agree to increase the state's share of profit by 10%.
This was turned down by Vedanta, which challenged the policy, and the issue is currently before the courts.
"The applicability of the pre-NELP extension policy to the Rajasthan block PSC is currently sub judice," the company said.
According to Vedanta, the May 1995 PSC for the block provided for an automatic ten-year extension on the same commercial terms if there was oil and gas left to be produced. However, the government has midway retrospectively changed fiscal terms in the name of extension.
State-run exploration and production company, ONGC, which has a 30% stake in the Barmer oil and gas fields has also maintained that the existing PSC provided for an extension under same terms and conditions.