News Oil & Gas

Cairn, ONGC pay higher profit share for Barmer block


Vedanta Ltd’s Cairn Oil & Gas and state-run Oil and Natural Gas Corporation Ltd (ONGC) have paid higher profit share to the government for their Rajasthan block for the period after its production-sharing contract (PSC) came to an end on 15 May last year, said a top government official.

The firm promoted by Anil Agarwal and India’s state-run upstream explorer paid $55 million as higher government share from the Barmer hydrocarbon block, known as profit petroleum, for the period, following a Delhi high court order last month on an appeal by the Union government. The PSC was signed on 15 May 1995 for a 25-year period.

While Vedanta made the payment on 30 March, ONGC paid its share of additional 10% profit petroleum along with applicable interest on 31 March.

Metals and mining major Vedanta acquired Cairn India, credited with the largest onshore oil discovery in India, in April 2017. Cairn Oil & Gas accounts for around 26% of India’s domestic crude oil production and has a presence in 58 blocks. Vedanta is the operator of the Rajasthan block RJ-ON-90/1 with a 70% participating interest, while the remaining 30% is held by ONGC.

According to the contract, profit petroleum is calculated only after the companies recover all their costs.

“The higher profit petroleum (PP) has been paid after judgment of the high court of Delhi pronounced on 26.03.2021. The issue between Vedanta and Govt. (GoI) was if GoI can extend the PSC for pre-NELP Exploratory Blocks on the basis of its policy dated 07.04.2017 whereas Cairn (Vedanta) was seeking extension on the existing fiscal terms of PSCs. As per Gazette notification dated 07.04.2017, 10% higher PP is payable to the Govt. during the extended period,” an ONGC spokesperson said in an emailed response.

This increase in profit petroleum comes against the backdrop of a separate cost recovery dispute that is under arbitration over an additional $520 million that the government has sought as additional profit petroleum dues from Vedanta.

With the arbitrator stating that no coercive action is to be taken, the practice of awarding interim extensions has also come to an end.

A Vedanta spokesperson declined comment. Queries emailed to a ministry of petroleum and natural gas spokesperson on Sunday afternoon wasn’t answered.

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