CIL to Pay $0.1mn if it Fails to Meet Exploration Commitment in Oil Block

Mining baron Anil Agarwal's Cairn India won a third of its total haul of 41 oil blocks in India's maiden bid round under open acreage licensing policy by committing a miniscule exploration programme whose non-fulfilment will attract less than Rs 10 million penalty, according to bid information available with DGH. However, company CEO Sudhir Mathur insists that Cairn has put in an offer far superior than the originator or the firm which originally wanted the block, and it will do much more than the committed work programme.

Cairn India, which is now part of Vedanta Ltd, had earlier this year won 41 blocks of the 55 areas auctioned in the first bid round under the Open Acreage Licensing Policy (OALP). It was the only company to bid for all the 55 blocks on offer, much ahead of state-owned ONGC and OIL. The blocks were awarded based on the work programme or the commitment to explore and drill for oil and gas, and the percentage of hydrocarbon a company was willing to share with the government. Both these parameters had equal weightage.

According to information available with the Directorate General of Hydrocarbons (DGH), the firm appeared keen to acquire only 26 blocks on which it committed to drill wells and do 3-dimensional (3D) seismic survey. On a Rajashtan block, it committed to drill 16 wells while most had work programme committed of doing 2D/3D seismic running into several hundred square kilometers.

But on 14 blocks it committed to do a maximum of ?50 or 60 sq km of two-dimensional (2D) seismic or less than 0.02 per cent of acreage got over an exploration period of 6 years, the bid information with DGH showed. No well was committed to be drilled on any of these blocks.