Cabinet approves policy for extending oilfield contracts

The Cabinet today approved a policy for granting extension to licences of oil and gas fields like that of Cairn India, on payment of an additional 10 per cent profit share.
The policy covers blocks like Rajasthan oilfields of Cairn India which were awarded prior to advent of New Exploration Licensing Policy (NELP) in 1999.
Cairn's exploration license expires in 2019 and the company had been seeking a 10-year extension.
That extension will now come following the Cabinet Committee on Economic Affairs (CCEA) approving the policy but the company will have to pay an additional 10 per cent profit petroleum during the extended life of the contract.

The CCEA chaired by Prime Minister Narendra Modi "approved a policy for grant of extension to the Production Sharing Contracts (PSC) signed by Government of India awarding pre- NELP exploration blocks to enable and facilitate investment to extract the remaining reserves," an official statement said here.
The 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 / Improved Oil Recovery (EOR/IOR) Projects and as such the production would extend beyond the current duration of PSC," it said.

During the current year, the production from these oil and gas blocks, allotted in pre-NELP regime, is around 55 million barrels of oil and 965 million standard cubic meters 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 USD 5430 million," it said.
The policy will help accelerate and supplement indigenous production of hydrocarbon from existing blocks and act as a progressive step towards achieving the target of 10 per cent reduction in import of crude oil by 2022.

"Among others, it includes oil and gas blocks in the state of Rajasthan that account for about half of the country's onland production of crude oil," the statement said without naming Cairn's Barmer district block.
Extension of these oil blocks will be major stepping stone in sustaining and enhancing onland production.
"The government's share of Profit Petroleum during the extended period of contract would be 10 per cent higher for these fields, thus bringing additional revenues to the government," it said.
In addition, the policy brings out detailed guidelines regarding grant of extension, criterion for evaluation of request, time frame for consideration of request and duration of extension.

The extension of these contracts is expected to bring extra investments in the fields and would generate both direct and indirect employment.
The policy aims at bringing out clear terms of extension in fair and transparent manner so that the resources can be expeditiously exploited in the interest of energy security of the country besides improving the investment climate.