Cairn may produce 71% from Rajasthan oil fields

Cairn India, a subsidiary of the UK-based Cairn Energy, may produce up to 71 per cent more oil from the Rajasthan field, according to a top company executive.

The Rajasthan field is the largest oil find in the country after Oil and Natural Gas Corporation’s (ONGC) Bombay High discovery in 1974. ONGC holds 30 per cent in the block.

ON A HIGH

ONGC holds 30% in the block

ONGC and Cairn India have written to the government to benchmark the price to a variety of oil produced in Indonesia

Cairn may get a price of between $100 and $110 per barrel with Brent oil currently trading around $115

Cairn plans to begin production from 3 blocks in the Rajasthan field from the second half of 2009

ONGC and Cairn India have written to the government to benchmark the price to the oil produced in Indonesia. The Indonesian oil varieties are trading at a discount of 5-13 per cent to Brent crude oil, the international benchmark oil produced primarily in the North Sea.

With Brent oil trading around $115, Cairn may get between $100 and $110 a barrel. “Once the enhanced recovery methods are implemented, the peak production from the Rajasthan field may go up to 300,000 barrels daily,” said Cairn India Chief Executive Officer Rahul Dhir in an interview from London.

The company may also produce oil at the current approved peak rate of 175,000 barrels a day and double the peak production period to 10 years, Dhir added.

Cairn plans to begin production from three blocks in the Rajasthan field in the second half of 2009. The company is expected to reach a peak rate of 175,000 barrels a day, or around 20 per cent of the total oil currently produced in India, by around 2012. The country consumed 3.03 million barrels of crude oil in 2007-08 and around a third of this came through imports.

Dhir said the potential to produce more oil would rise as the company is currently tapping only three of the 24 blocks. Cairn will start a pilot-enhanced oil recovery scheme next year. With enhanced recovery methods, it will be able to recover up to 50 per cent oil from the field as against 37 per cent.

Cairn is still looking for a buyer for the oil, which has a high wax content and needs to be transported through heated pipelines as it coagulates at normal temperatures. The crude oil refiners are also unwilling to buy the oil unless they get a substantial discount. “The oil is waxy and has high residue content,” said an executive with a state-owned refiner.

“It’s up to the government to decide on the price as well as the refinery,” Dhir said, adding the oil was likely to be sold to multiple refineries.

Cairn India and ONGC will invest $3.6 billion in bringing the oil to production and have already spent $1 billion, Dhir added.