Cairn Energy - A tryst with the Indian market *

Abstract:

The subject of this caselet is the oil and gas exploration market in India. The new exploration and licensing policy (NELP) and its effects are also focused on. The caselet discusses the controversy between Cairn Energy PLC and ONGC over the payment of production tax (cess). It also discuss at length the actions of the petroleum ministry to resolve the problem and the refusal of Cairn Energy to pay the cess and royalty.

Issues: » Progress under NELP. » Controversy between Cairn Energy PLC and ONGC over the payment of production tax (cess) » Refusal of Cairn Energy PLC to pay the cess. » Law Ministry's decision over the payment of statutory dues of royalty. » Dispute between Cairn Energy PLC and Petroleum Ministry. » Cairn Energy's disagreement with the ruling of Law Ministry. Introduction In 1996-97, crude oil production in India was around 32.90 million tonnes (mt) while consumption of petroproducts was around 79.16 mt. India's gross import of crude oil and petroproducts in the 1996-97 fiscal touched 54.17 mt, at a cost of Rs 34,172 crore. To reduce the increasing gap between demand and production, the Government of...

Questions for Discussion:

1. Is Cairn right in refusing to pay the cess on crude oil it planned to produce from Barmer district? Justify your answer.
2. What is NELP? Discuss its role in increasing the production of oil and natural gas in India.

Key words:
Crude oil, petro-products, New exploration and licensing policy (NELP), Cairn Energy PLC, Declaration of Commerciality, Thar desert, Field Development Plan, Oil and Natural Gas Corporation (ONGC), Petroleum Ministry, production tax (cess), Law Ministry, Production Sharing Contract (PSC).

* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.