The government turning down Vedanta Ltd’s request to extend its contract in the Cambay basin (CB-OS/2 block), Gujarat, may not have any major impact on Vedanta Group’s financials, analysts tracking the company said. “Cambay was, anyway, one of the declining fields for the company. Even their polymer injections are happening only in Rajasthan,” said an analyst who did not wish to be identified.
For fiscal 2025, Cambay had an average daily gross operated production of 5.1 kboepd, which is about 5 per cent of the company’s total average daily gross operated production of 103.2 kboepd. The company’s oil and gas business itself accounted for around 3 per cent of the company’s revenue in June quarter, up from around 2 per cent in the same period a year ago.
Earnings before interest, tax, depreciation, and amortization from this segment stood at around 12 per cent, up from around 10.5 per cent a year ago.
“It’s no surprise that ONGC will be taking control of the block. Vedanta has starved its oil and gas portfolio of investment for years while diverting focus to deleveraging the promoter,” short-seller US-based Viceroy Research told ET, adding that the timing is telling, as the petroleum ministry has already raised red flags on Vedanta’s demerger, warning of insolvency risk in the spun-off entity.
Vedanta is headed for a demerger, with the oil and gas business set to be one of the five independently listed companies. Of Vedanta’s sum of the parts valuation, analysts typically ascribe around 10 per cent to its oil and gas business. Given that Cambay accounted for only around 5 per cent of the company’s production in fiscal 2025, the impact on the share price is expected to be negligible, they said.
In 2023, Vedanta group proposed splitting operations into five separate, publicly listed companies-aluminium, oil and gas, power, iron and steel, and zinc and silver. The CB-OS/2 block has been in operation for over two decades. It holds Lakshmi and Gauri fields and currently produces 3,400 barrels of oil per day and 3.4 lakh standard cubic metres of gas per day. These production numbers highlight the continued strategic value of the block.
Cairn Oil and Gas, the oil and gas arm of Vedanta Ltd, was the operator of the Gujarat offshore block CB-OS/2 with a 40 per cent stake. ONGC held a 50 per cent interest in the block while Tata Petrodyne originally held 10 per cent stake.
