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Petroleum ministry takes strong exception to Cairn India’s failure to secure clearance from DGH  

The petroleum ministry has taken strong exception to Cairn India’s failure to secure clearance from a Director General of Hydrocarbons-led panel before announcing a 37% increase in resource base at its Rajasthan field. This could jeopardise its parent Cairn Energy's plan to sell a significant stake to Vedanta Resources. The ministry suspects the intention of the “hurried” announcement was to boost the company’s valuation before a sale. Following the announcement on March 23, Cairn India shares rose 3.7% to close at Rs 292.80 on the Bombay Stock Exchange.

Sources said the ministry has already conveyed its displeasure to Cairn India. DGH, which regulates the upstream oil sector recently asked Cairn India to explain why it did not follow the procedure mandated in the production sharing contract (PSC) before going public with a vision to produce 2,40,000 barrels of oil per day (bpd), up from the earlier estimate of 1,75,000 bpd peak output, said a person privy with the development.

Besides, since ONGC is paying the entire royalty to the government for crude from the Rajasthan field (RJ-ON-90/1), despite owning only about a third of the venture, the government wants to have clarity on whether the buyer would foot the royalty bill for its proportionate holding.


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