04 Sept 2009;economictimes.indiatimes.com:Rajeev Jayaswal:NEW DELHI: Cairn India has agreed to pay an estimated $9 a barrel levy on crude oil produced from its Rajasthan fields, ending a dispute involving the Indian arm of the UK-based Cairn Energy, its equity partner ONGC and the Union government, a petroleum ministry official said. “Cairn said it will pay the cess under protest,” he said, requesting anonymity. Cairn India, the operator of the Barmer Basin oil field in Rajasthan that holds a 70% participating interest in the project, will bear a burden of around $1 billion over the life of the project, which could impact its bottom line. A Cairn India spokesman neither confirmed nor denied the development. “We are in discussions with the government of India on this issue,” he said. Cairn India, which made the country’s largest onland oil discovery in Barmer in 2003, started production from the field last month. The crude it produces will fetch a lower price compared with the oil produced at ONGC’s Bombay High or Reliance Industries’ MA oilfield due to its high sulphur content. The production will be ramped up to 175,000 barrels of oil per day in two years. Oil from Rajasthan will account for over 20% of India’s domestic oil production. The production sharing agreement, the legal contract between the oil producing company and the government, is silent as to who should bear the cess burden. Earlier, Cairn had threatened to challenge the government’s demand for a cess of Rs 2,500 per tonne at a London-based arbitration forum. Commenting on the cess issue in January at a conference call, Cairn India CEO & managing director Rahul Dhir had said, “We have been in discussions with the government to see if there is a resolution, in the absence of that we will look at arbitration.”
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