Govt approves licence extension for 28 oil and gas fields

New Delhi: The Cabinet on approved extending licences of 28 small- and medium-sized oil and gas fields, but there was no decision on Cairn India's prolific Rajasthan oil block.

Production sharing contracts (PSCs) for as many as 28 fields, including western offshore Panna/Mukta and Tapti oil and gas fields operated by BG Group of UK, are due for extension.

"The Cabinet Committee on Economic Affairs (CCEA) today approved the Hydrocarbon Exploration Licensing Policy, or HELP, extending term of 28 PSCs," Oil Minister Dharmendra Pradhan told PTI here.

PSCs have been extended till economic life of the asset.

He did not specify the terms on which the PSC has been extended.

The ministry, based on recommendation of a committee headed by the then additional secretary and financial adviser S C Khuntia, had drawn up a draft extension policy that stipulated an increase in royalty as well as the government's profit share from the fields, official sources said.

The policy had stipulated that the oil companies pay royalty at prevailing rate as against Rs 481 per tonnes they currently pay.

Also, it wanted the government's share of oil and gas to be increased by 5 percentage points - to 55 percent in fields like Panna/Mukta where it is currently at 50 percent and to 60 percent in fields where it's at 55 percent.

Royalty rates for blocks offered under the New Exploration Licensing Policy (NELP) since 1999 are 10 percent of the wellhead value of gas. For oil, it is 12.5 percent of the price for onland areas and 10 percent for offshore areas.

For the 28 small and marginal fields, which were offered prior to the advent of NELP, the royalty was fixed at Rs 481 per tonne for crude oil and 10 percent of the well-head value of gas.

The sources said the Khuntia committee felt that since investment in most of the fields has already been recovered, the extension can be subject to them paying current rates of royalty and a marginal increase in government's profit share.

The extension policy is to cover 28 small and marginal fields, but Cairn India's Rajasthan block will not be covered as it has a different regime.

The PSC for the block RJ-ON-90/1 expires in May 2020 and Cairn is seeking an extension of 10 years.

"Cairn block is not included in this policy," Pradhan said.

Sources said the terms for Cairn's Rajasthan block extension cannot be very different from the small and marginal fields. However, no decision on terms of extension of Cairn's block has so far been taken, they said.