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Govt can renegotiate Cairn India oil block's fiscal terms: LawMin

The government can look at raising its share of oil from the fields from a current cap of up to 50 per cent as well as allowing state-owned ONGC, which is the licensee of the block, to raise its stake, sources privy to the development said.

Cairn's contractual term for exploring and producing oil from the Rajasthan Block RJ-ON-90/2 expires in 2020 and the company has made a formal application for extending the licence by another 10 years saying the block also has significant potential to produce natural gas.

Asked for an opinion on the issue by the Oil Ministry, the Law Ministry stated that the extension of contract can be done only on 'mutually agreed terms and conditions' by all parties to the contract ie government, ONGC and Cairn, they said.

The Law Ministry said the Production Sharing Contract (PSC) for the Rajasthan block clearly states that extension can be granted on 'mutually agreed' terms and conditions.

The phrase 'mutual agreement' clearly indicates a new agreement implying thereby that the parties to the agreement are at liberty to renegotiate the terms and conditions of the contract including fiscal terms and conditions, it opined.

Accordingly, the administrative ministry can renegotiate the terms and conditions in the best interest of the Union of India before granting extension and there appears to be no legal objection in this regard, it added. On the term of extension, it left it to the oil ministry to decide based on ground facts. According to the PSC, the contract can be extended by five years in case of an oil field and by 10 years if it is producing gas.
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