Cairn gets three-month extension for Rajasthan oil block

License to explore and produce oil and gas from Barmer was due to renewal in May this year, but pending settlement of the dispute the government has given five extensions

New Delhi: Vedanta Ltd’s oil and gas arm Cairn has got a further three-month extension of license for its prolific Rajasthan oil block pending settlement of a dispute over $520 million cost recovery. The license to explore and produce oil and gas from Barmer was due to renewal in May this year, but pending settlement of the dispute the government has given five extensions, the latest till January 31, 2021.

In notes to its second quarter earnings statement, Vedanta said it believes “the company is eligible for automatic extension of production sharing contract (PSC) for Rajasthan (RJ) block on same terms with effect from May 15, 2020.” The government had in October 2018 agreed to extend by 10 years the contract for Barmer fields in Rajasthan after the expiry of the initial 25-year contract period on May 14, 2020.

This extension was subject to the Vedanta Group firm agreeing to raise the share of the government’s profit from oil and gas produced from the block by 10 per cent. While Cairn protested against the additional payout and took the government to court, the extension was subsequently held up due to the government claiming additional profit petroleum after re-allocating Rs 2,723 crore common cost between different fields in the block and disallowance of Rs 1,508 crore cost on a pipeline. The government wants the company to clear the dues before the extension is granted.

“One of the conditions for extension relates to notification of certain audit exceptions raised for FY16-17 as per PSC provisions and provides for payment of amount, if such audit exceptions result into any creation of liability,” it said. Vedanta said it has disputed such demand. “The company has reasonable grounds to defend itself which are supported by independent legal opinions,” it said.