HC issues directions on Cairn plea for extension of oil

The Delhi High Court today issued time-bound directions to the Centre, ONGC and Cairn India, a subsidiary of UK-based Vedanta group, in order to help the government to take a decision on extension of a contract the companies have with the government to produce oil from a Rajasthan block.
Justice Rajiv Sahai Endlaw directed the Centre to give Cairn India a list of further particulars it needs to take a decision on the company's request for extending till 2030 the production sharing contract (PSC) that it and Oil and Natural Gas Corporation (ONGC) have with the government.
The court also directed the government to seek from Cairn details that ONGC requires for consenting to commercial terms of the project which is being run as a joint venture by the two companies.

Cairn was asked to provide these details to ONGC within two weeks and the PSU is to thereafter take a decision in six weeks on whether it consents to Cairn's proposal for extension of the production sharing contract (PSC) they have with the government.
If there is a consensus between the two, then the documents would be forwarded to the government which will take a decision in three months on whether to extend the PSC which is set to expire in May 2020, the court said.
In the event of a difference of opinion, the court directed that the matter be listed before it on April 5, 2016.

The court issued the directions in order to "enable time- bound decision making" as Cairn in its plea has contended that delay on the government's part to take a decision is preventing it from infusing further investment to the tune of Rs 30,000 crore and more in the project.

The court was of the opinion that by having a fixed time schedule for the entire exercise, further production might not suffer.
Cairn said that as per terms of the PSC, if commercial production starts, then the contract has to be extended for a term which has to be mutually agreed on by both the joint venture parties.

It contended during the arguments that there was a consensus between it and ONGC on extension of the PSC for a period of 10 years.
This claim was disputed by the government as well as ONGC.
The government said that prior to taking any decision it needs various particulars, including envisaged plan of action, estimated reserves, how much can be recovered and what would be the government's share, amongst others.
The government also said that it needs to see that both Cairn and ONGC are "on the same page" with regard to the proposal for extension and the time period.

Cairn said that when none of state-run companies could find oil in the block, it had invested around Rs 10,000 crore in exploration back in 1995 when the PSC was entered into and added that the government has earned around Rs 80,000 crore from the commercial production out of the area.
It said it is committed to bringing in more investment, however, it needs a confirmation from the government that the PSC would be extended.
In its plea, Cairn has said that estimated recoverable assets in the block are approx 1.2 billion barrels of oil equivalent, of which 466 million barrels are expected to be recovered beyond current PSC period until 2030.

Currently, it is producing natural gas from the block and supplying it to government companies.