The Government has directed state-run Oil and Natural Gas Corporation (ONGC) to take interim operational control of an oil and gas block from Vedanta, after rejecting the company’s request to renew its contract.Vedanta, which produces about one-fifth of India’s crude oil, has challenged the decision in the Delhi High Court. On Monday, Justice Sachin Datta recused himself from hearing the case, which will now be listed before another bench on Tuesday. This is the first instance of the government denying a contract renewal for an oilfield operator, reported ET.The order covers the CB-OS/2 block, located off India’s west coast. ONGC said in a regulatory filing that the move was a “purely interim measure taken by the government to maintain continuity of petroleum operations in public interest.” It added, as quoted by ET, the step was aimed at “safeguarding petroleum reserves until the block is awarded to another party.”Vedanta, which operated the block with a 40% stake, said the field contributed “less than 0.3%” to its overall earnings. ONGC holds 50% and Tata Petrodyne 10% in the block, which includes the Lakshmi and Gauri fields. The fields currently produce about 3,400 barrels of oil and 340,000 standard cubic metres of gas per day.The consortium received the block in 1998 under the pre-New Exploration Licensing Policy (NELP) and was granted a mining lease in 2002. Under this older system, renewals require mutual agreement with the government and payment of an additional 10% share of petroleum profits.
Push for investment in oil and gas
The decision comes at a time when India is trying to attract more private and foreign investment in its oil and gas sector. The industry has faced stagnation in recent years, with falling production and no major discoveries. To boost investor confidence, the government has passed a new law and launched a fresh licensing round for exploration blocks.
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