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Vedanta Ltd to invest $4 billion in Rajasthan’s Barmer oil block

Oct 31,2018

Cairn Oil and Gas, a unit of Vedanta Ltd, will invest $4 billion in its flagship Barmer oil block in Rajasthan. The Delhi high court allowed an extension of 10 years to the oil block on the condition that it pays a higher share of profit to the government. The extension results in an overall increase of oil and gas production of 125,000 barrels and reserves of 400 billion barrels.


“The extension also increases our reserves by 250 million barrels. That is quite a big booster for our overall reserve position,” said Mathur, the chief executive officer of Cairn India “Cairn has driven up its share of India’s oil output by 3.5 times in the last 9 years, significantly from the Rajasthan block and the extension is a great recognition of our accomplishment.”


The extension also introduces the way for further investments. “We are investing $4 billion, out of which we have already signed contracts worth $2.3 billion and the work has started in a big way. There are already thirteen rigs working in the Rajasthan block,” said the CEO.


Oil and Natural Gas Corporation (ONGC) Rajasthan a State Run Corporation is a 30% partner in the Barmer oil block.


“The government of India, has granted its approval for a 10-year extension of the Production Sharing Contract for the Rajasthan Block, RJ-ON-90/1,” Vedanta Ltd said. The 25-year contract for exploration and manufacturing of oil and gas from Barmer block RJ-ON-90/1 was due for renewal on 14 May 2020.


In April 2017, the government had approved a new policy for extension of Production Sharing Contracts, which would provide for a contract extension only if companies operating the fields agree to increase the state’s share of profit by 10%.


However, Vedanta felt that the May 1995 Production Sharing Contract for the block provided for an automatic 10-year extension on same commercial terms if there are hydrocarbons left to be produced. Vedanta thus challenged the April 2017 policy and the matter is under judicial consideration.


“The applicability of the pre-NELP (New Exploration Licensing Policy) to the Rajasthan Block Production Sharing Contracts is currently sub judice,” Vedanta said in the filing. Its partner Oil and Natural Gas Corporation was also of the opinion that Production Sharing Contracts provides for an extension on same terms.