Delhi HC gives centre two months to decide on extending Cairn's Barmer PSC

The Delhi High Court on Monday gave the central government another two months to arrive at its decision regarding the extension of a production-sharing contract (PSC) with Cairn India for extraction of oil in Barmer, Rajasthan.

Cairn India, a subsidiary of the UK-based Vedanta group currently has a PSC with Oil and Natural Gas Corporation Limited (ONGC) for producing oil from the Barmer fields till 2020. The company wants the present PSC to be extended till 2030 and has filed a petition in court, after being dissatisfied with delays by the central government in arriving at its decision.

Cairn holds a 70% stake in the Rajasthan block, while ONGC owns the remaining 30%. Barmer is the largest onshore oil-producing project in India, producing about 166,000 barrels of oil equivalent per day and accounting for 27% of the country’s overall oil production. 

The centre had moved an application in court on Monday requesting time till January 31, 2017, to come up with a uniform policy regarding extension of PSCs.  “We would require more time to consider the technical and financial impact of the extension. Similar entities have also approached us with PSC extensions and we will take a decision after considering everything,” said advocate Kirtiman Singh, appearing for the centre.

Senior advocate C A Sundaram, representing Cairn opposed the Centre's plea by highlighting that it had sought extension of the PSC way back in 2009 and the inordinate delays in taking a decision were preventing it from investing a further Rs 30,000 crore in the project. Sundaram said that the funds were in the pipeline and any further postponement would affect the company’s standing with international lenders.

Rejecting the government’s attempts at clubbing the decision on the Cairn PSC to a larger policy, Justice Sanjeev Sachdeva directed the centre to arrive at its decision independently by January 6, 2017.   While arriving at its conclusion, the court observed that each PSC was different and could not be clubbed together under a single policy.

The court has asked the government to take a decision in terms of its December 14, 2015, order, as per which ONGC had six weeks to decide whether the contract needed to be extended, after which the centre had three months to make its decision. ONGC had communicated its approval for the extension on July 14 this year, after which the Centre had stated that it would decide on the issue by October 14.

In its petition, Cairn has mentioned that it had invested around Rs 10,000 crore back in 1995 after none of the government-operated companies could find oil on the block.

Cairn also states that the government has earned Rs 80,000 crore in oil production from the field. The company estimates that the block has recoverable assets of approximately 1.2 million barrels, 466 million of which are expected to be extractable only after 2020.

The court has now listed the matter on January 9, 2017, for further consideration.