The Oil Ministry has asked sectoral regulator DGH to renegotiate fiscal terms of Cairn India’s Rajasthan oil block before its licence can be extended beyond the contractual period. “We have asked DGH to renegotiate terms with both the contractors, Cairn and Oil and Natural Gas Corp (ONGC),” a senior government official said. Cairn’s contractual term for exploring and producing oil from the Rajasthan Block RJ-ON-90/2 expires in 2020 and the company has made a formal application for extending the licence by another 10 years saying that the block also has significant potential to produce natural gas.
As per the Production Sharing Contract (PSC), the licence can be extended by 5 years if it is oil bearing, and by 10 years if it has natural gas potential. ONGC, which is the licensee of the block, has agreed to 10 year extension but asked the ministry to decide if fiscal terms need to be renegotiated. The official said the ministry put the Directorate General of Hydrocarbons on the job after the law Ministry opined that fiscal terms can be renegotiated while granting extension beyond contractual period. The Government can look at raising its share of oil from the fields from a current cap of up to 50 per cent as well as allowing state-owned ONGC to raise its stake.