'Extend the PSC or we won't invest,' says Cairn

Vol 16, PW 22 (30 May 13) People & Policy

Anil Agarwal has been stalking the corridors of Shastri Bhawan to hammer home his message that the oil ministry must quickly remove irritating obstacles to Cairn India’s plans to hike production from Rajasthan.

In his latest pitch Vedanta owner Agarwal held a 15-minute face-to-face meeting with oil minister Veerappa Moily on May 22. A source tells us Agarwal bluntly told Moily Cairn would not finalise investment plans for the Mangala, Bhagyam, Aishwariya and other fields at RJ-ON-90/1 unless it is granted an extension to the PSC, which expires in 2020.

“Agarwal said the Rajasthan fields could produce until 2040,” we hear. Moily asked Agarwal to be patient and wait for the government to announce a policy to extend all pre-NELP contracts that would address not just Cairn’s concerns but those of other operators facing the same predicament.

Moily, say sources, privately supports the extension policy. Agarwal then met oil secretary Vivek Rae for 45 minutes over tea and biscuits; joint secretary exploration Aramane Giridhar was supposed to attend, but had already left for lunch! Agarwal raised another sore point, protesting vigorously at the government's move to increase profit share from 20% to 30% of crude sales by the year-end.

"Agarwal said this would hit Cairn's profits," adds a source. Cairn’s profit margins are already under pressure, said Agarwal, with an Enhanced Oil Recovery programme at Mangala that will see a sharp hike in OPEX from $8/barrel to $28/barrel.