The Government of India has rejected the request from Vedanta’s unit, Vedanta Cairn Oil & Gas, to extend its Production Sharing Contract (PSC) for the offshore CB-OS/2 block in the Cambay basin, Gujarat. Instead, it has directed the state-owned Oil and Natural Gas Corporation (ONGC), which holds a 50 per cent stake, to take interim control of operations, assets, data, and ongoing management.
The CB-OS/2 block had been operated under Vedanta Cairn with a 40 per cent share, while Invenire Energy holds the remaining 10 per cent. The PSC for the block was originally signed on August 30, 1998, and expired on June 30, 2023. Vedanta and its partners had continued conducting operations while awaiting the government’s decision on the renewal of the contract.
The CB-OS/2 block includes the Lakshmi and Gauri fields. It currently produces around 3,400 barrels of oil per day and about 3.4 lakh standard cubic metres of gas daily. Reserves in the block, according to a 2019 report by DeGolyer & MacNaughton, are estimated at about 13.6 million barrels of oil and oil-equivalent gas.
In its filing, ONGC said the takeover is “purely interim,” intended to maintain continuity of petroleum operations in public interest and to safeguard reserves, until the block is re-awarded. Vedanta has contested some of the government’s positions, including objections raised by the Ministry of Petroleum & Natural Gas regarding its demerger plans, and disputes over how profit petroleum is computed in other blocks, especially Rajasthan.
Although this decision marks a setback for Vedanta, analysts believe the financial impact on the group will be limited. The CB-OS/2 block contributes less than 0.3 per cent to Vedanta’s overall EBITDA. Moreover, other key Vedanta blocks have already been granted extensions: the Rajasthan block RJ-ON-90/1 has been extended to May 14, 2030, and the Ravva field (PKGM-1) has been extended to October 27, 2029.
The refusal to renew the CB-OS/2 PSC and the transfer of interim control to ONGC follows a letter from the Ministry dated September 19 informing partners that the extension application “has not been accepted.” No specific reason was cited in the notification. Vedanta Cairn has denied allegations made by the ministry related to liabilities disclosure.
This development will have implications for Vedanta’s operations in the Cambay basin going forward, as ownership under the government nominee shifts in the short term, while the longer term future of the block remains to be decided.
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