Cairn Oil and Gas has been denied full extension of production sharing contract once again with the government allowing the company to operate the oilfield only for three more months. The temporary extension has been given to the company on five occasions since the expiry of the initial licence period in May. The current extension is now valid till January 31, 2021.
The company had been reduced to operate on temporary permission from the government which has denied full 10-year extension to the company’s production sharing contract, claiming higher share of profit petroleum. After delays, government had agreed to extend the contract by 10 years in 2018 after the expiry of the initial 25 year contract period on May 14, 2020.
This extension was conditional upon the company agreeing to increase the share of government’s profit from oil and gas produced by 10%. With the company challenging the government call for higher profit petroleum in courts and now also issuing a notice on arbitration disputing the claims, a formal extension of Barmer PSC has been denied to the company and it is operating on temporary extensions.
The 25 year PSC of the company expired on May 14, 2020 and since then the company has already got extensions ranging from 15 days to three months. The first three-month extension expired in mid-August after which a 15-day extension was given till the month end and then extension was given till September 30, then till October and now till January 31.
“The Rajasthan PSC allows extension on the same terms for a period of 10 years in case of commercial gas production and we are accordingly eligible for the extension. The block produces more than 20 per cent of India’s crude oil production and has the potential to double this over the next three years. This requires a reduction in fiscal levies and administrative support for timely approvals” Cairn Oil and Gas said in a statement.
