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Vedanta Ltd, led by mining magnate Anil Agarwal, has faced a significant setback as the Indian government has rejected its request for an extension of the production sharing contract (PSC) for the key Cambay basin oil and gas block CB-OS/2 in Gujarat. This decision marks a critical development in the government’s management of hydrocarbon resources and impacts one of Vedanta’s important upstream assets.
Key Highlights of the Denied Extension for Cambay Basin Block
The Cambay basin block CB-OS/2 is jointly operated by Vedanta Cairn Oil and Gas (a Vedanta subsidiary) with a 40% stake, the state-owned Oil and Natural Gas Corporation (ONGC) holding 50%, and Invenire Energy holding 10%.
The Ministry of Petroleum and Natural Gas issued a letter on September 19, 2025, stating that the application for extending the PSC beyond its expiry on June 30, 2023, was not accepted.
ONGC has been directed to take interim control of the block’s operations, assets, and data under a government nominee capacity to ensure continuity of production and safeguard petroleum reserves.
The block currently produces about 3,400 barrels of oil per day and 3.4 lakh standard cubic meters of gas per day, with fields including Lakshmi and Gauri.
Vedanta Cairn had acquired the block along with other assets when it purchased Cairn India in 2011 for $8.67 billion; Cairn India merged into Vedanta Ltd in 2017.
Reasons Behind The Government’s Decision and Implications
While the government has not publicly elaborated on the denial reasons, it coincides with ongoing disputes between Vedanta and the Petroleum Ministry concerning profit petroleum computations from Vedanta’s Rajasthan block. Earlier in 2025, the Ministry had raised objections to Vedanta’s proposed corporate restructuring plans, citing insufficient disclosure of liabilities, especially regarding government dues.
The denial of the CB-OS/2 extension signifies a second setback following the ministry’s objections during Vedanta’s demerger hearings at the National Company Law Tribunal (NCLT). The government’s move to assign ONGC interim operations ensures no disruption in production but suggests a review and potential reallocation of the block in future contracts.
Impact on Vedanta and Outlook for the Cambay Basin
The Cambay basin CB-OS/2 block contributes less than 0.3% to Vedanta’s overall EBITDA, indicating a limited but strategically relevant asset.
The block’s estimated reserves stand at 13.6 million barrels of oil and oil-equivalent gas, underscoring its medium-scale potential.
With the PSC expired and no extension granted, the block reverts to government control, marking a transition phase before possible re-tendering to new operators.
Vedanta remains active and profitable in its other blocks, including the Rajasthan RJ-ON-90/1 and Ravva PKGM-1 fields, which have received PSC extensions till 2030 and 2029 respectively.
The move signals tighter government oversight of resource allocation, emphasizing compliance, transparency, and maximizing national benefits.
Strategic and Industry Context
Vedanta’s setbacks reflect increasing government vigilance in managing India’s hydrocarbon sectors amid evolving energy policies and contractual frameworks. The petroleum ministry’s insistence on addressing outstanding liabilities and ensuring rigorous disclosures highlights regulatory tightening.
For Vedanta, the challenge reiterates the need for enhanced government engagement and alignment with national energy objectives. For the broader oil and gas industry, this decision underscores the dynamic and sometimes uncertain nature of contract renewals in a sector balancing investor confidence with sovereign controls.
Conclusion: Vedanta Faces Challenges as Cambay Basin Block Transitions Under Government Oversight
The denial of the PSC extension for the Cambay basin oil and gas block represents a notable development in Vedanta Ltd’s upstream operations and the government’s resource management strategy. While the interim operational control by ONGC ensures uninterrupted production, the decision points to a recalibrated future for this asset. As Vedanta navigates regulatory complexities and ongoing disputes, the industry watches closely for implications on contract renewals, operational control, and the strategic direction of India’s critical hydrocarbon resources.
Sources: Moneycontrol, Economic Times, PTI News, The Week, Devdiscourse
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