Govt Transfers Vedanta's Oilfield to ONGC, Mining Giant Moves to Court

State-owned Oil and Natural Gas Corporation Ltd (ONGC) on Monday said it is taking over an offshore block on India’s west coast following a government directive. The block was earlier operated by Anil Agarwal-led mining giant Vedanta.

The temporary transfer to ONGC comes after the government rejected Vedanta’s application to renew the licence of the oilfield contract, first signed in 1998.

The CB-OS/2 block, also known as the Cambay basin oil and gas block and comprising the Lakshmi and Gauri fields, is currently producing 3,400 barrels of oil per day and 340,000 standard cubic metres of gas per day. A pre-New Exploration Licensing Policy (NELP) production sharing contract (PSC) was awarded in June 1998 to a consortium led by Vedanta, ONGC and Tata Petrodyne. Following the commercial discovery of oil and gas, a petroleum mining lease was granted in 2002.

Vedanta held a 40% interest in the block, while ONGC and Tata Petrodyne held 50% and 10% stakes respectively.

A PSC is an agreement between the government and a company granting time-bound rights to explore, develop and produce resources in exchange for a pre-agreed share of output after cost recovery. Blocks awarded under the pre-NELP regime can only be renewed with mutual consent between contractors and the government. During the extended period, contractors must also share an additional 10% of profits with the government.

This is the first time the government has refused an oilfield operator’s renewal request. Vedanta’s extension plea for its Barmer block in Rajasthan had also faced years of delays and multiple court hearings. Although that contract was eventually extended, its terms remain under judicial review. Vedanta also operates the Ravva oil and gas fields in the Krishna Godavari basin off the Andhra coast.

"ONGC has been directed to take control of all data, assets, operations and responsibilities associated with the block in the capacity of government nominee," ONGC said in its filing, adding that its takeover was "purely an interim measure" to "maintain continuity of petroleum operations in the public interest and safeguard petroleum reserves until the block is awarded to another party".

Vedanta Moves Delhi High Court

Vedanta 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.

A spokesperson for Vedanta told PTI, "The contractors of the said block were ONGC, Vedanta and Invenire. ONGC was the largest shareholder with a 50% stake, while the remaining stake was shared between Vedanta and Invenire. The block contributed less than 0.3% to Vedanta’s overall EBITDA."

CB-OS/2 marks a second setback for Vedanta after the petroleum ministry’s opposition in the National Company Law Tribunal (NCLT). The ministry has objected to Vedanta’s demerger plan, citing inadequate disclosure of liabilities, particularly those tied to the Rajasthan block.

In 2023, Vedanta Group proposed splitting its operations into five publicly listed entities covering aluminium, oil and gas, power, iron and steel, while a restructured Vedanta Ltd would retain the zinc and silver businesses.

During a recent NCLT hearing on the demerger, the ministry warned that recovering government dues from the demerged oil and gas unit could become nearly impossible if the company went into liquidation. Vedanta has rejected these claims.

The government and Vedanta remain at odds over issues including profit petroleum calculations from the Rajasthan block. Before denying the CB-OS/2 extension, the government had approved 10-year extensions for Vedanta Cairn’s Rajasthan block (RJ-ON-90/1) until May 2030 and the Ravva field (PKGM-1) until October 2029.