Finally, Vedanta Ltd has won a 10-year extension of its contract for Rajasthan oil block. Now, the contract has been extended to 2030. After this announcement, Vedanta’s shares rose by 3.6%. This extension has been made on the condition that company should pay a higher share of profit to the government.
There is 25-year contract for exploration and production of oil and gas from Barmer block of Vedanta is due. It must be renewed on May 14, 2020.
Recently, the Government of India has granted its approval for a ten-year extension of the Production Sharing Contract for Rajasthan block. With the effect from May 15, 2020, the renewal of an additional period of 10 years will be applicable.
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Last year, the government approved a new policy for extension of PSCs. Under this policy, the extension beyond the initial 25-year contract period is provided only if companies operating the fields agree to increase state’s share of profit by 10 percent.
This policy is challenged by Vedanta in court. “The applicability of the Pre-NELP Extension Policy to the Rajasthan Block Production Sharing Contract is currently sub judice,” Vedanta said.
An extension gives Vedanta a certainty and allows it to invest in its Rajasthan block for future production. Rajasthan block contributes about a quarter of the country’s crude oil production.
