NEW DELHI: The government will extend the lease for oil or gas fields four years before the initial 20-year term expires, failing which an extension plea would be deemed to have been rejected, says a draft proposal on the new exploration policy aimed at eliminating extension uncertainties faced by contractors.
Billionaire Anil Agarwal-owned Cairn India has been lobbying the government for years to extend the contract to operate the oil and gas block in Barmer, Rajasthan, by 10 years after the initial 20-year agreement runs out in 2020. Cairn contributes nearly 30% of India’s domestic output and has urged the court for more than a year to direct the government to quickly decide on an extension.
The draft rules, when formalised, will not apply to the Barmer block but will end the kind of uncertainty Cairn faces today for blocks awarded under the new exploration policy.
According to the draft contract under the new Hydrocarbon Exploration and Licensing Policy (HELP), the lease has to be granted for an initial period of 20 years, which can be extended by mutual agreement between the government and contractors for “five years or beyond as may be mutually agreed, or as per extant government policies.” The previous policy provided for an extension of five years for an oilfield and 10 years for a gas field, or such period as was mutually agreed upon.
The draft contract, open to stake holder consultation, requires the contractor to submit a request for extension ‘no later than 5 years before the expiry of the existing contract’. “The Government reserves the right to approve the request for extension no later than 4 years before the expiry of the existing contract. If not approved within the stipulated time, such a request would be deemed to be rejected,” as per the draft contract.
Last year, the government had announced a policy on extension of the so-called Pre-NELP ‘discovered’ fields, or 28 small, medium sized fields discovered by Oil and natural Gas Corp (ONGC) and Oil India Ltd and awarded to private joint ventures between 1994 and 1998. The policy, most importantly, required the government share of profit to increase by ten percentage point during the period of extension.
Cairn’s Barmer field is not covered by this policy. Indian oil and gas fields are guided by different contracts, depending on the specific policies prevalent at the time they were awarded.