India oil ministry sets rider to extend Cairn India contract for 10 years.

Economic Times reported that Anil Agarwal's Vedanta Group of India is heading for a fresh showdown with the government as the oil ministry said that the state's share of oil from the Rajasthan block should rise if Cairn India wants to extend its contract for the block for 10 years.

State-run behemoth ONGC, which prevailed over Cairn India in a dispute over royalty payments is also demanding its pound of flesh and said that its 30% stake in the block should increase significantly up to 50%. ONGC holds the exploration and production licence for the block, and will be able to seize control of the entire block if Cairn's contract is not extended.

The 25 year contract of Cairn's Rajasthan block lapses in 2020, but the issue is vital for the entire exploration sector as the government's decision will set the precedence for how other companies would be treated after their contracts expire.

Exploration firms said that oil and gas fields need thousands of crores of investment, which cannot be planned without clarity on this matter.

One official said that the company has written to the oil ministry and argued that its production sharing contract (PSC) allows unconditional extension for five years in case of an oilfield and 10 years if the block produces gas in commercial quantities.

ACairn India spokesman said that the company has sought an extension and is pursuing the matter actively with the relevant authorities.


STEELGURU