New Delhi: In a setback to Anil Agarwal-led Vedanta Group, the government has rejected an application from its subsidiary for extending the production sharing contract (PSC) of a key Cambay basin oil and gas block, CB-OS/2.
Vedanta Cairn Oil and Gas, a unit of Vedanta Ltd, operated the Gujarat offshore block with a 40 per cent stake, while state-owned Oil and Natural Gas Corporation (ONGC) held 50 per cent and Invenire Energy 10 per cent.
ONGC, in a regulatory filing, said the Ministry of Petroleum and Natural Gas, through a September 19 letter, informed partners that the extension request was not accepted. ONGC has been asked to manage operations temporarily, though no reason was cited for the denial.
The PSC, signed on August 30, 1998, expired on June 30, 2023. Vedanta-led partners had continued operations while awaiting a decision on renewal. The CB-OS/2 block houses Lakshmi and Gauri fields, producing 3,400 barrels of oil and 3.4 lakh standard cubic metres of gas daily.
According to a 2019 reserve report by DeGolyer and MacNaughton, the block held an estimated 13.6 million barrels of oil and oil-equivalent gas.
Acquired by Vedanta in 2011 as part of its $8.67 billion purchase of Cairn India, the block was among three key assets, alongside Rajasthan’s prolific Barmer fields and the Ravva field in the Krishna Godavari basin. Cairn India was merged into Vedanta Ltd in 2017.
For Vedanta, the rejection comes soon after the petroleum ministry raised objections before the National Company Law Tribunal (NCLT) against the group’s demerger plan.
The ministry flagged inadequate disclosures on liabilities, particularly concerning the Rajasthan block, and warned that recovering government dues would be difficult if the demerged oil and gas company were to face liquidation. Vedanta denied these allegations.
The government and Vedanta are also engaged in disputes over computation of profit petroleum from the Rajasthan block.
The CB-OS/2 decision adds to these challenges, despite the fact that the block contributed less than 0.3 per cent to Vedanta’s overall EBITDA.
Vedanta Cairn, commenting on the ministry’s decision, said, “The contractors of the block were ONGC, Vedanta and Invenire. ONGC was the largest shareholder with 50 per cent stake, while Vedanta and Invenire shared the remainder. The block contributed less than 0.3 per cent to Vedanta’s overall EBITDA.”
ONGC clarified its takeover was a “purely interim measure” to ensure continuity of petroleum operations and safeguard reserves until the block is reallocated.
“ONGC has been directed to take control of all data, assets, operations and responsibilities associated with the block as the government’s nominee,” the filing said.
Despite the denial for Cambay, the government has granted Vedanta Cairn 10-year extensions for its two other key contracts—the Rajasthan block RJ-ON-90/1 till May 14, 2030, and the Ravva field PKGM-1 till October 27, 2029.
Tata Petrodyne originally held the 10 per cent stake in CB-OS/2 before selling to Invenire Energy in a $100 million deal in 2019.
Though Vedanta had advanced its development plans for CB-OS/2’s discoveries across a 3,314 sq km shallow water area, the contract’s expiry and the ministry’s refusal to renew effectively return the block to government control, marking another strategic setback for the group.