The Cabinet Committee on Economic Affairs (CCEA) on 22 March 2017 approved a policy for grant of extension to the Production Sharing Contracts (PSC) that were awarded by Union Government for Pre-NELP Exploration Blocks before 1999.
This extension comes as a relief for Vedanta-owned Cairn India Ltd that operates India’s largest onland block at Barmer in Rajasthan. Cairn India holds 70 per cent stake in the Rajasthan block while ONGC owns 30 per cent.
The policy aims to enable and facilitate investment to extract the remaining reserves.
Highlights of the Policy
• It will enable the contractors to extract not only the remaining reserves but also the additional reserves by implementing new technologies.
• In certain fields, additional recovery of hydrocarbons can be obtained through Enhanced Oil Recovery / Improved Oil Recovery (EOR/IOR) Projects.
• The policy will act as a progressive step towards achieving the target of 10 per cent reduction in import of crude oil by 2022.
• Among others, it includes oil and gas blocks in the State of Rajasthan that account for about half of the country's onland production of crude oil.
• The policy brings out detailed guidelines regarding grant of extension, criterion for evaluation of request, time frame for consideration of request, duration of extension etc.
• The extension of these contracts is expected to bring extra investments in the fields and would generate both direct and indirect employment.
• The share of Profit Petroleum of Union Government during the extended period of contract would be 10 per cent higher for these fields, thus bringing additional revenues to Government.
In the year 2016-17, the production from the oil & gas blocks allotted in Pre- NELP regime is around 55 million barrel of oil and 965 MMSCM of natural gas. The recoverable reserve from these blocks is estimated to be more than 426 million barrel of oil equivalent.
During the extension period, contractors are expected to make an additional investment of more than USD 5430 million. Moreover, the extension of these oil blocks will be major stepping stone in sustaining and enhancing onland production.
What: Approved by CCEA
When: 22 March 2017