The recent spurt in global crude oil prices has resulted in Vedanta, the metals and mining major, putting its development and exploration projects on a fast track but issues of cess and higher profit petroleum continue to be a concern. Indian benchmark crude oil touched $61.54 a barrel on Thursday. Speaking to Business Standard, Sudhir Mathur, newly appointed chief executive for the Cairn oil and gas business at Vedanta, said, “We have started investing in a $1-billion programme, which we expect to yield about 100,000 barrels of oil in the next 18-20 months. When oil prices go up, it allows us to take more risks. We had earlier decided to work on sweet spots first.” Mathur said when oil prices started sliding, it was challenging and industry across the world went into despondency. “We had projects but they were viable at a $70 price. We took a conscious call to bring down our cost to $5-6 (a barrel) and rework the projects. The only project that went on was the Mangala enhanced oil recovery and it helped us survive two years.” The company now has five projects and each is viable at $40. “As prices go up, we can switch on tight oil and tight gas much faster. Our long-term average for projects that we are triggering now is $40.” The company’s production sharing contract for Barmer expires in 2020 but the company would be required to pay a higher 10 per cent share of its production to the government, under a Cabinet decision. Mathur said they were still in discussion with the government to continue with the earlier profit petroleum share, arguing this was an extension of the contract period. The Anil Aggarwal-promoted Vedanta is also seeking permission from the government to export crude oil from its Barmer fields. “Free trade can happen within a geographical region if there are adequate numbers of buyers. If there are only four refiners in the country, it is difficult to get the right price. We have been requesting the government to give us the freedom to explore markets,” said Mathur. Adding: “The government has the force majeure right to stop export.
We do it with potatoes, onion, sugar, iron ore and other commodities. You can do it with crude oil whenever required. Between $55 and $60, you can make viable a million barrels.” Eighty per cent of the company’s realisation on crude oil goes to the government in the form of various taxes. Vedanta cites the example of United States. For nearly a century, the US was both an exporter and importer of crude oil. Exports were restricted in 1970s. In January 2016, US started exporting crude oil again. The company is targeting to take its production to 300,000 barrels. Its five projects include the Raageshwari Deep Gas (RDG) project; the enhanced oil recovery (EOR) programme at Aishwariya fields, the EOR programme at Bhagyam and Barmer Hill and Aishwariya Barmer Hill, which is a tight oil. Besides, the company is undertaking Mangala ASP project. Mathur said the company would be undertaking drilling in its Krishna Godavari block in the first quarter of 2018. The company would also be putting in bids for the oil blocks offered by the government under the open acreage policy. It has bought data for 15 blocks under the new policy. The company has been demanding reduction in the cess rate to 8 per cent of the realized price. “While lower cess rate will entail loss of revenue for the government of India lower production tax shall spur investments leading to additional production and overall increase in taxes to the government in the form of royalty, profit petroleum and corporate taxes.