Cairn wants ONGC support in PSC extension talks

Vol 17, PW 18 (24 Apr 14) Exploration & Production

Cairn India can expect ONGC to bargain hard in exchange for support as it pursues its fight with the government for a 10-year extension to the PSC at Rajasthan block RJ-ON-90/1.

Cairn wrote to ONGC on April 9 asking for its backing in talks with the oil ministry to extend the PSC life from May 14, 2020 when it expires and the lease returns to ONGC. Cairn hasn’t received a reply but senior ONGC managers tell us the Vedanta-promoted company can expect ONGC to demand its equity stake rises from 30% to 50% as the price of its support.

ONGC also wants to stall PSC extension talks for three years to better understand reserves. "Cairn’s letter gives no technical data," confirms ONGC.

“How can we decide an extension six years in advance Nobody knows what oil reserves will be left.” He adds it’s too early to decide the asset's future because the consortium has yet to implement and see the results of an Enhanced Oil Recovery programme, which will see polymers injected into the reservoir to increase production.

ONGC holds the Petroleum Mining Lease for the pre-NELP block which will go back entirely to the state-owned explorer for re-auction in 2020 if the PSC isn't extended. Going solo in Rajasthan without Cairn is also an option, hint senior ONGC officers.

Cairn declined to comment.

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