Cairn set to win landmark PSC extension

Vol 17, PW 1 (08 Aug 13) People & Policy

Cairn India is anxiously waiting for a critical policy recommendation from an inter-ministerial government committee on PSC extensions - expected by end-September.

Cairn has been chasing the oil ministry for almost a year demanding a 10-year extension to the PSC at Rajasthan block RJ-ON-90/1, which ends in 2020. If successful, it would have far-reaching implications for other operators.

Cairn wants to invest another $2.4bn at this block, which is producing 175,000 b/d. But crucially it wants to know if the investment is justified.

Happily an inter-ministerial committee headed by oil ministry additional secretary and financial advisor SC Khuntia is likely to grant PSC extensions to all companies whose past performance is satisfactory. Cairn submitted its PSC extension proposal on July 26 to the Cabinet Committee on Investment (CCI) headed by the Prime Minister.

In turn the CCI asked the oil ministry to take a decision. "But we can't decide till we receive a recommendation from Khuntia’s committee," says an oil ministry official.

“Khuntia is away on a training course for three weeks and will rejoin the ministry on August 14.” Only after Khuntia’s committee makes its recommendation will oil secretary Vivek Rae and oil minister Veerappa Moily take a call.

Most expect the ministry to prepare an overall PSC extension policy for all operators and send it to the cabinet for formal approval. “International practice dictates that the decision to grant a PSC extension is made on a field to field basis," says a committee member.

"Each case is unique in terms of recoverable reserves and exploration and development potential."

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