Cabinet clears extension of pre-Nelp blocks, including Cairn India's Barmer

Barmer block has Cairn India and ONGC as its partners

The Union Cabinet today approved a policy to grant extension to the production sharing contracts (PSC) for pre-NELP (New Exploration Licensing Policy) exploratory blocks, giving a major boost to Cairn India and other major producers.  

The move is likely to attract an additional investment of more than $5430 million in these blocks. Interestingly, the Government share of profit petroleum during the extended period of contract would be 10% higher for these fields, thus bringing additional revenues to government.

The Barmer block in Rajastan has Cairn India and state-run Oil and Natural Gas Corporation (ONGC) as its partners and the companies were batting for an extension of PSC beyond 2020. The block, also known as Rajasthan block, includes the Mangala, Bhagyam, Aishwariya and Raageshwari oil and gas fields. It is the biggest onshore oil-producing project in India, producing about 166,000 barrels of oil equivalent per day, accounting for 27% of the country’s overall oil production.

This policy will enable the contractors to extract not only the remaining reserves but also plan to extract additional reserves by implementing new technologies. In certain fields, additional recovery of hydrocarbons can be obtained through enhanced oil recovery and improved oil recovery (EOR/IOR) projects and as such the production would extend beyond the current duration of PSC. “In the year 2016-17 (upto February, 2017), the production from these oil and gas blocks, allotted in Pre- NELP regime, stood at 55 million barrel of oil and 965 million metric standard cubic meter (MMSCM) of natural gas. The recoverable reserve from these blocks is estimated to be more than 426 million barrel of oil equivalent. During the extension period, contractors are expected to make an additional investment of more than $5,430 million,” a petroleum ministry statement said.

According to the government, the move will help accelerating indigenous production of hydrocarbon from existing blocks and act as a progressive step towards achieving the target of 10% reduction in import of crude oil by 2022. When contacted, a Cairn India spokesperson confirmed the development but said that the company is yet to get an official confirmation from the government.

Cairn India holds a 70% stake in the Rajasthan block, while ONGC owns 30%. The block RJ-ON-90/1 is spread over 3,111 sq. km west of Barmer. According to Cairn India, the PSC extension of Barmer block would add another 250 million barrels of oil equivalent into its reserves. Last year, Cairn India had approached the Delhi High Court, seeking its intervention for an early decision on the extension of the PSC, saying the company is planning for investments worth Rs 35,000 crore after 2020.