Cairn India to invest up to $750mn on KG-Basin Block over 5yrs

Investment will be spent on creating of necessary infrastructure, production facilities and transportation

Buoyed by discoveries of huge quantities of oil and gas, Cairn India has urged the Director General of Hydrocarbons to declare one of the wells in its onshore KG-ONN-2003/1 block at Nagayalanka on East coast as 'Commercial Discovery', sources close to the development said.

Once the DGH approval comes, the JV will invest $700-750 million over 3-5 years on the Block. The investment includes creation of necessary infrastructure and production, sources said.

The Cairn, ONGC JV recently wrote a letter to DGH saying that 'Field Development Plan' will also be submitted soon in this regard.

"As per the Declaration of Commerciality (DoC) documents submitted to the DGH, the Cairn, ONGC JV has in-place oil resources of about 320 million barrels, of which about 40 million barrels can be recovered (from the Block). It has also found small amounts of gas with recoverable reserves of around 70 billion cubic feet (bcf) of gas," sources told PTI.

"The investment ($700-750 million) will spread across 3-5 years. It will be spent on creating of necessary infrastructure, production facilities and transportation," sources said.

Cairn had earlier confirmed that in its onshore KG-ONN-2003/1 block, post three successful fracs, the productivity of one of the appraisal wells, Nagayalanka-1z-ST has increased three-fold and that has significantly improved the commerciality of the discovery.

It may be recollected that the well was spudded (the process of beginning to drill a well) in the previous quarter to evaluate the size and commerciality of the discovery Nagayalanka-SE-1 within which two well appraisal programme had been approved by the JV partner.

The second appraisal well Nagayalanka-NW-A is planned to be drilled towards the North West to evaluate the reservoir extent, sources added.

Industry experts feel that since the Block is an onshore find, the investments will be lower in comparison to off-shore ones which make the threshold for commerciality lower.

Exploration activities have been conducted on the KG-ONN-2003/1 Block as per the Production Sharing Contract in February 2007, including 2D and 3D seismic acquisition, processing, re-processing, interpretation and drilling which to the present date has resulted in the Nagayalanka-1z and Nagayalanka-SE-1 discovery.

During Phase-I of the PSC Exploration Period, five exploration wells were drilled and the Nagayalanka-1z well resulted in the Raghavapuram discovery.

In Phase-II of the PSC Exploration Period, the Nagayalanka-SE-1 exploration well was drilled and resulted in a discovery of hydrocarbons in the Golapalli.