New Delhi: Vedanta Ltd has won a 10-year extension of its contract for the prolific Rajasthan oil block, but on condition that it pays a higher share of profit to the government, the company said on Monday.
The 25-year contract for exploration and production of oil and gas from Barmer block RJ-ON-90/1 of Vedanta, formerly Cairn India, is due for renewal on 14 May, 2020.
"The Government of India, acting through the Directorate General of Hydrocarbons, Ministry of Petroleum and Natural Gas 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.
The tenure of the RJ Block PSC has been extended for an additional period of 10 years with effect from 15 May, 2020.
"Such extension has been granted by the Government of India, pursuant to its policy dated 7 April, 2017, for extension of pre-New Exploration Licensing Policy (pre-NELP) exploration blocks PSCs subject to certain conditions," it said.
The government had in 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 percent.
Vedanta has challenged the policy and the matter is in courts now.
"The applicability of the pre-NELP Extension Policy to the Rajasthan Block PSC is currently sub judice," the firm said.
The company feels that the May 1995 Production Sharing Contract (PSC) for the block provided for an automatic 10-year extension on same commercial terms if there are oil and gas left to be produced. But now, the government has midway retrospectively changed fiscal terms in the name of extension is unjust to it.
State-owned Oil and Natural Gas Corp (ONGC), which as a government nominee picked up 30 percent stake in the Rajasthan block in 1995, also was of the opinion that PSC provides for an extension on same terms.
ONGC had first in May 2015, then again on at least two occasions in 2016, concurred with Cairn's interpretation of the PSC for extension of the Rajasthan contract by 10 years on same terms.
Vedanta had challenged the conditions for the extension of the contract in Delhi High Court. The Delhi High Court in July this year ordered extension be given on old terms and conditions.
The Centre, however, has challenged the court order and the matter is sub judice currently.
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Updated Date: Oct 29, 2018 15:23:03 IST