Cairn seeks nod to raise oil production by 70% in Raj block

Cairn India currently produces just over 175,000 barrels per day or 8.75 million tons a year from Mangala and Bhagyam oilfields in the Barmer block in Rajasthan. It has permission to raise output to 235,000 bpd (11.75 million tons) from Mangala, Bhagyam and Aishwariya or MBA fields.

The company believes the production can reach 300,000 bpd or 15 million tons per annum and has made an application to the government seeking permission to explore within the 3,111 square kilometer mining lease covering 25 oil and gas finds.

"We have got a proposal (from Cairn). The Directorate General of  Hydrocarbons (DGH) will take a view in one to two weeks," a top oil ministry source said.

DGH under V K Sibal had some years back taken a view that exploration is not permitted within an area that has been delineated after discoveries for production of hydrocarbons.

Cairn, however, says the production sharing contract (PSC) defines a development area as one that not just includes a discovery or a group of discoveries but also "area of potential petroleum deposits".

To make its case, billionaire Anil Agarwal, whose Vedanta Group had last year taken over Cairn India, met Prime Minister Manmohan Singh on July 6. He followed this meeting with a discussion with Oil Minister S Jaipal Reddy and Oil Secretary G C Chaturvedi before wrapping up the day with a meeting with Planning Commission Montek Singh Ahluwalia.

Sources said the exploration Cairn wants to undertake is additional to the investment it is making in developing MBA and 22 other oil and gas finds in the 3,111 sq km area delineated as development area.

All investments that Cairn, which holds 70% interest in the Rajasthan block, makes in exploration and development is first recovered from revenues earned from sale of oil. Profits are split with the government only after the entire investment is recovered.

State-owned Oil and Natural Gas Corp (ONGC) holds the remaining 30% stake in the Rajasthan block. Sources said Cairn currently produces 150,000 bpd from Mangala and about 25,000 bpd from Bhagyam field.

Bhagyam had an approved peak of 40,000 bpd, but the field has under-
performed and there was a need to drill more wells. The company has secured an approval to raise the peak output from Bhagyam to 60,000 bpd while that of Aishwariya, the first biggest oil field in the Rajasthan block, to 25,000 bpd from previously stated 10,000 bpd.

With the revised peak, the three fields should produce 235,000 bpd but this level is possibly only next year as Bhagyam has proved to be not as prolofic as Mangala.