The country’s largest public sector company by profits Oil and Natural Gas Corp (ONGC), which holds 30 per cent in the Cairn India Ltd operated Rajasthan oil block, has expressed its desire to exit from the block.
ONGC has written to the government saying it has found the project economically unviable due to the heavy statutory levies (which includes royalty and cess) that it will have to bear.
Cairn is operating the RJ-ON-90/1 block in Rajasthan, which is expected to begin crude oil production by the end of this month. ONGC is the licensee of the block and holds a 30 per cent interest, while Cairn owns the remaining 70 per cent.
ONGC said it is left with no choice but to offer and exit from the block, as the statutory levies which it will have to pay for oil production is making its investments in the block unviable.
“What we are getting out of taking a 30 per cent interest in terms of crude oil is much lesser than what we pay towards statutory levies,” said a senior ONGC official.
The official said the royalty payment alone could be Rs 1,760 crore, assuming crude prices of $40 a barrel and average production rate of 120,000 barrel per day. Another Rs 2,500 a tonne cess could mean an additional annual outgo of Rs 1,500 crore for ONGC.