Cairn India, which plans to invest $3 billion over three years to improve reserves and increase production, primarily in Rajasthan, wants government to extend contract on Barmer oil block by 10 years.
The company would invest this amount after considering the remaining economic life of the field. Therefore, the firm seeks extension of the contract period.
The company wants government to assure that it would extend the contract period by 10 years when the production-sharing contract for the block (RJ-ON-90/1), expires in 2020. The firm acqured the block before the oil and gas auction rounds were held.
Meanwhile, the company plans to explore shale oil or gas from the area. This requires more investments in technology.
In 2002, Cairn acquired a 100 per cent stake in the block from Shell, which had signed the contract in 1995. After the first oil discovery was made in 2004, ONGC came in as a partner. Today, Cairn holds 70 per cent and ONGC 30 per cent.
According to the norms in India, an extension of 5-10 years is given based on associated or non-associated gas production under the contracts before the oil and gas auction regime.
Reports indicate that countries across the globe define the exact term for extension of a contract based on the remaining economic life of the field, with some countries applying a cap of 15-20 years on the extension.
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