Vedanta's Indian subsidiary awarded 41 exploration blocks

The FTSE 250 company described the OALP as a government-led initiative organised by the Directorate General of Hydrocarbons of the Government of India.

It said the 41 blocks awarded to Vedanta Limited comprised 33 onshore blocks and eight offshore blocks.

Subject to approval from shareholders, Vedanta Limited would enter into 41 revenue-sharing contracts (RSCs) with the Government of India to effect the Transaction.

A licence permitting exploration, development and production operations of all types of hydrocarbons would be granted under the terms of the relevant RSC in relation to each block.

Vedanta explained that the exploration period would consist of two phases - the initial exploration phase, and the subsequent exploration phase.

In total, the exploration period would be a duration of six years for all blocks, subject to any extension granted.

“The development and production period of each contract will be a maximum of 20 years from the date of grant of the petroleum mining lease following discovery of previously unknown deposits of hydrocarbons and approval of the relevant field development plan, subject to any extension granted,” Vedanta’s board said in its statement.

“The directors of the company believe that the transaction complements the group's existing strategy to focus on production growth.

“The OALP is the first major auction of hydrocarbon blocks to take place in India since 2010 and provides an opportunity for the group to acquire new acreages from all available areas in the sedimentary basins of India.”

Vedanta said the objective of licensing the blocks was to acquire fresh seismic data, and to drill exploration wells to establish resources and reserves of oil and gas.

The bid cost of $551m represents Vedanta Limited's total committed capital expenditure on the blocks during the exploration phase, and would be satisfied in cash using the group's existing cash resources.

It was expected that the capital expenditure would occur over a period of about three to four years.

Vedanta Limited also committed to completing a minimum work programme within the first three consecutive years.

Failure to fulfil part or all of the committed work programme requirements in respect of any block would result in liquidated damages being payable by Vedanta Limited to the Government of India under the relevant RSC.

Vedanta Limited said it would, in the case of any commercial discoveries in any block, and subject to the terms of the RSCs and applicable law, share a specified proportion of the net revenue from each block with the Government of India.

“Pursuant to the RSCs, the average unweighted revenue share for the blocks shall be 33% for the initial two years in the case of onshore blocks, three years in the case of shallow water blocks or five years in the case of deep and ultra deep water blocks,” the Vedanta board said.

“Following these initial periods, the revenue share payable to the Government of India shall vary depending on the amount of revenue received.

“The directors do not expect the transaction will have any material impact on the group's earnings for the financial year ending 31 March 2019.”