Cairn Oil receives three-month extension for oil block in India

Vedanta Resources subsidiary Cairn Oil and Gas has received an additional three-month licence extension for the Rajasthan oil block in India.

However, a recovery dispute of over $520m is still pending, PTI reported.

The licence to explore and produce oil and gas from Rajasthan’s Barmer field under an initial 25-year contract period was due for renewal in May.

Due to a dispute over cost, the government has given five extensions, the latest until 31 January.

In its Q2-2020 earnings statement, Vedanta stated that it believes the company is eligible for automatic extension of production sharing contract (PSC) for Rajasthan (RJ) block on the same terms, with effect from 15 May.

Back in October 2018, the Indian Government agreed to extend the contract for Barmer fields by ten years, after the expiry of the initial contract period.

According to PTI, this extension was subject to Vedanta Group agreeing to increase the government’s share of the profit by 10% in the oil and gas produced from the block.

The cost dispute arose as Cairn ‘protested against the additional payout and took the government to court’.

As a result, the extension was subsequently held up as the government claimed additional profit petroleum after re-allocating Rs27.23bn (approximately $367m) of common costs between different fields in the block and a ‘disallowance’ of Rs15.08bn (c.$203m) on a pipeline.

Located in block RJ-ON-90/1, the Rajasthan block is spread over 3,111km² in the Barmer district.

Before the extension is granted, the government wants Cairn Oil and Gas to clear the dues.

The government stated: “One of the conditions for extension relates to notification of certain audit exceptions raised for FY16-17 as per PSC provisions and provides for payment of amount, if such audit exceptions result into any creation of liability.”

Vedanta said it has disputed such demand.

In August last year, Cairn Oil and Gas planned to invest more than $1.1bn in three oil fields in Barmer.