ONGC may exit from Cairn’s Rajasthan Oilfields
ONGC Plans May Exit Cairn Gas Fields in Rajasthan
Oil and Natural Gas Corp Ltd, India’s largest oil and gas exploration and production company is planning to exit Cairn India’s prolific Rajasthan Oilfields because of Royalty issues.
Why ONGC wants to exit ?
Under the license conditions for the Rajasthan block, ONGC took a 30 per cent stake in the discovery without any cost but has to bear 100 per cent of the royalty, in addition to development costs and cess, which makes it an unviable proposition for the company.
ONGC has to bear 30 per cent of the USD 2.4 billion cost of developing the fields and pay more than three times its share of USD 105 million royalty. Also Cairn wants ONGC to pay even its share of Rs 2,500 per tonne cess levied on crude oil (Rs 15,000 crore annually).
ONGC has written to the Petroleum Ministry seeking reimbursement of royalty that it has to pay on behalf of Cairn India Ltd in the prolific Rajasthan block.
If the request for reimbursement is not considered then it could result in ONGC giving up its 30 per cent stake in the block RJ-ON-90/1. Cairn India, which is the operator of the block, holds 70 per cent stake.
The Rajasthan fields have in-place oil reserves of 3.7 billion barrels, of which, 2 billion barrels lie in the three main fields known as Mangala, Bhagyam and Aishwarya andĀ Cairn india will reach its peak oil production of 1,75,000 barrels of oil per day (bopd) by 2011. Initial production from the fields would be 30,000 bopd.
