ONGC approves Cairn plan to raise Bhagyam field cost

Company has raised the capex required from $469.6 million to $607.97 million

State-owned Oil and Natural Gas Corporation (ONGC) has approved partner Cairn India’s move to raise the cost of developing the Bhagyam field in Rajasthan block by 30 per cent to $608 million, say sources.

Cairn India has revised the field development plan by raising the capital expenditure requirement from $469.6 million to $607.97 million.

Originally, Cairn, the operator of the Rajasthan block with 70 per cent interest, in October 2009 pegged the Bhagyam field development at $526.1 million. Later, to expediting the implementation, the company optimised the field development plan (FDP) in August 2010, bringing it down to $469.6 million. ONGC holds the remaining 30 per cent interest in the block.

Sources said Cairn had in the FDP proposed to drill 81 wells to produce a plateau of 40,000 barrels of oil a day (two million tonne a year). An estimated 93.6 million barrels out of ultimate reserves of 415 million barrels was to be recovered till May 2020.  However, the Bhagyam field, put on production in January 2012, has lagged the forecasts.

In May last year, Cairn proposed what is known as Bhagyam FDP revision-1, proposing to drill additional 54 wells. Under the new plan, Cairn has increased the reserves to 525 million barrels from 415 million barrel previously but the cumulative production is envisaged at 85.56 million barrels as compared to 93.05 million barrels till the term of Rajasthan contract ie May 2020.

Bhagyam is the second biggest of the 28 oil and gas discoveries Cairn has made in the Rajasthan block. It currently produces over 190,000 barrels per day of crude oil from the block with about 150,000 bpd coming from the giant Mangala field. Bhagyam produce over 25,000 bpd.