Cairn to begin crude oil production from Rajasthan this month

Cairn India will begin producing crude oil from its prolific Rajasthan fields by the month-end if it gets approval from partner ONGC for field investments and if the Government is able to find buyers for the oil.     

Even though Rajasthan fields will help India cut on its oil imports, Oil and Natural Gas Corp (ONGC) has not yet approved the revised development plan for the Barmer fields.      

The Government on the other hand has found buyers for less than one-third of the company's planned peak output.      

"Our facilities will be ready to start production by end of May, subject to partner (ONGC) and Government approvals and finalisation of crude sales agreements with Government nominees," a Cairn spokesperson said.      

Only after ONGC approves the revised field development cost of $ 2.4 billion can the Government approve the investment in Rajasthan fields.      

The Government has found buyers in Indian Oil, Hindustan Petroleum and Mangalore Refinery for only 2.4 million tonnes of the 8.75 million tonnes peak output planned by Cairn. It will produce 1.5 million tonnes in 2009-10 but the three firms are willing to take no more than 0.7 million tonnes.      

Next year the output would climb to seven million tonnes but IOC says it could take a maximum of 1.5 million tonnes while HPCL and MRPL would take 0.5 and 0.4 million tonnes, respectively. ONGC holds 30 per cent in the fields where Cairn is the operator with 70 per cent.

Cairn had earlier stated it will start production from the first train of capacity 30,000 barrels a day of oil from the field in the third quarter and will introduce a second train of 50,000 barrels per day by Q4 2009, which will coincide with the commissioning of the world's longest heat insulated pipeline.     

It will reach a peak production rate of 175,000 barrels a day in 2011. Mangala, the largest field in the Rajasthan block, is expected to produce 30,000 bpd by the second quarter of 2009-10. Production will hit a plateau of 1,25,000 bpd during H1 of 2010.     

Besides 1,25,000 bpd of Mangala, the adjacent Bhagyam field would produce 40,000 bpd and Aishwariya another 20,000 bpd. The peak of 175,000 bpd or 8.75 million tonnes would be reached in 2011.     

Cairn is investing USD 850 million in a processing facility and another $940 million in a heated oil pipeline from the fields to the port of Viramgam in Gujarat.     

Cairn India, the subsidiary of UK-based Cairn Energy, holds a 70 per cent stake and is the operator of the Rajasthan block. ONGC is its partner with a 30 per cent stake.