Vedanta Moves Delhi HC after Govt Denies Cambay Basin Block Extension, ONGC Takes Charge

Moneylife Digital Team 23 September 2025

Economy & Nation

In a rare move, the government of India has refused to renew Vedanta’s contract for operating the CB-OS/2 offshore oil & gas block in Gujarat’s Cambay basin, directing State-run Oil and Natural Gas Corporation (ONGC) to take interim control of the asset. The production sharing contract for the block expired on 30 June 2023, and the Union ministry of petroleum and natural gas (MoPNG) has decided against granting an extension to the Anil Agarwal-promoted company. Vedanta has challenged the government’s decision in the Delhi High Court. The case was mentioned on Monday, but justice Sachin Datta recused himself and it will be heard by another bench.

The CB-OS/2 block, discovered in the late-1990s, has been producing around 3,400 barrels of oil and 340,000 standard cubic metres of gas daily from its Lakshmi and Gauri fields. Vedanta held a 40% participating interest, ONGC 50%, and Tata Petrodyne (earlier Invenire Energy) the remaining 10%.

According to a regulatory filing by ONGC, the ministry has instructed the State-run explorer to take charge of 'all data, assets, operations and responsibilities' associated with the block. The company clarified that the move is a temporary measure to ensure uninterrupted production and safeguard petroleum reserves until the block is re-awarded.

The decision is the first time the government has rejected an operator’s extension plea under a pre-new exploration licensing policy (NELP) production sharing contract. Vedanta had operated the block since 1998, when it was awarded to the consortium. A petroleum mining lease was granted in 2002 following a commercial discovery.

The financial impact on Vedanta is expected to be marginal, with the block contributing less than 0.3% of the group’s overall earnings before interest, taxes, depreciation, and amortisation (EBITDA). Nevertheless, the move is seen as strategically significant as it signals tougher government scrutiny of contractual renewals in the upstream sector.

The denial of extension also adds to Vedanta’s recent troubles. Earlier this year, the petroleum ministry raised objections before the national company law tribunal (NCLT) over Vedanta’s proposed demerger into five listed entities, warning that liabilities linked to its Rajasthan oil block could be obscured.

Despite the setback, Vedanta continues to operate some of India’s largest hydrocarbon assets, including the prolific Rajasthan block (RJ-ON-90/1) which was granted a 10-year extension last year until 2030, and the Ravva field in the Krishna-Godavari basin, extended until 2029. However, disputes with the government over profit petroleum calculations and liabilities remain unresolved.

While the temporary addition of Cambay basin production is unlikely to materially alter ONGC’s output, it demonstrates the government’s intent to prioritise State-run operators in situations of contractual uncertainty.

With ONGC now in control, attention shifts to how quickly the government will re-award the block and whether Vedanta can secure legal relief. For now, the episode underscores the challenges private operators face in India’s upstream sector amid tightening regulatory oversight.

Comments