DGH rejects Cairn plea for restoring relinquished area in Raj

The DGH on May 5 wrote to the Oil Ministry saying return on nomination basis of any area previously relinquished by Cairn was not legally tenable

Upstream regulator DGH has rejected Cairn India's plea seeking return of nearly 8,000 square kilometres of area in its prolific Rajasthan block that it had over the years contractually relinquished.

The Directorate General of Hydrocarbons (DGH) on May 5 wrote to the Oil Ministry saying return on nomination basis of any area previously relinquished by Cairn was not legally tenable.

"Cairn needs to participate in future NELP or Open Acreage

Licensing Policy (OPAL) bidding with highest offer for award of additional acreages," it wrote.

Originally, the Rajasthan block, RJ-ON-90/1, was awarded to Royal Dutch Shell in pre-New Exploration Licensing Policy (NELP) round and a Production Sharing Contract (PSC) was signed on May 15, 1995. Cairn subsequently bought out Shell in the block.

The block covered an area of 11,108 sq km. The PSC of the block stipulated three phases of exploration totalling 7 years, which ended on May 14, 2002, the DGH said.

Subsequently, three extensions were granted to Cairn to explore/appraise the area even after the expiry of original exploration phase.

As per contractual requirement, Cairn relinquished or gave up areas were it had not found any oil or gas and retained only 3,111 sq km where it had made 25 discoveries.

"Article 3 of the PSC stipulates phase-wise relinquishment of contract area and further provides that only development areas and discovery areas are to be retained by the contractor (Cairn) at the end of the exploration phase," DGH said.

Having willingly relinquished the areas where it had not many any discovery, Cairn in April wrote to the government seeking return of all of the 7,997 sq km it had given up saying the area holds potential and needs to be explored.

"In all PSCs, in force in the country, there are no provisions for restoration of original contract area after the relinquishment and expiry of exploration period," DGH said.

It rejected Cairn's contention that the ara relinquished from the Rajasthan block was held by the government which had not awarded it to any third parties.

"Out of the relinquished area, 5 coal-bed methane (CBM) blocks have been carved out and awarded by Government of India, of which 2 blocks viz BS4-CBM-2005/III and BS5-CBM-2005/III are currently under operation," DGH said.

"All the relinquished areas are offered in subsequent NELP round bidding and therefore there is no reason to believe that hydrocarbon will remain unexplored," it said, adding granting of relinquished area to earlier contractor on nomination basis was not as per NELP.