Now, Cairn India-govt spat over Bhagyam production

There seems to be a fresh row between Cairn India and the Government. CNBC-TV18 learns that at the management committee meeting for the Rajasthan block held on the June 10, the oil ministry did not approve the FY12 production rate, work programme and budget for Bhagyam fields.

Cairn India is scheduled to start producing 40,000 barrels per day from Bhagyam in the second half of FY12, and sources say the company now fears this development may result in Cairn India's FY12 production being capped at 135,000 bpd per day versus its target of 175,000 bpd.

The oil ministry wants all prior entitlement issues to be resolved before giving it a go ahead to start production from Bhagyam. Cairn India has written to the oil ministry asking it to delink the entitlement interest issue from production, and that this production of 40,000 bpd is in the best interests of all stakeholders and the nation at a time when crude is being imported at a exorbitantly high price.

ONGC, which has a 30% participatory interest in the block and has been at loggerheads with Cairn over royalty, says it will agree to production commencing from Bhagyam but only if an expert first reviews the facilities.

Cairn India, in a response says, it's on track to start production from Bhagyam in the second half of the fiscal.