Cairn’s oil production cost in Rajasthan fields to double | business | Hindustan Times
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Cairn’s oil production cost in Rajasthan fields to double

business Updated: Feb 04, 2009 22:10 IST
Anupama Airy
Anupama Airy
Hindustan Times
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Field development cost for the oil production from Cairn India’s three oil fields in the Rajasthan block would almost double to $2.9billion due to rising cost of drilling, construction and manpower costs, an ONGC official said on Wednesday.

In 2005, Cairn got the approval to produce peak oil of 1,25,000 bpd from its oil discoveries in the Rajasthan block, namely the Mangla, Bhagyam and Aishwarya fields by investing $1.5 billion. Cairn India to produce a total of 1,75,000 bpd oil from the fields.

“Their board has approved the revised development cost but we have yet to approve it. But the revised pipeline cost has been approved by boards of both the firms,” the ONGC official, who could not be named, said. Cairn India owns 70 per cent stake in the block, while ONGC owns the remaining 30 per cent.

Cairn India has also revised the cost of laying the 600 kilometres of heated pipeline from the block to Gujrat to $940
million from the earlier estimated $800 million.

For selling its crude, Cairn is in talks with state refiners IOC, BPCL, HPCL and MRPL. The government had appointed MRPL as the official nominee to lift the Cairn crude but given the waxy nature of the crude, the state refiners are seeking discount on crude purchases.

“Our first priority is that the state firms should lift the entire Rajasthan crude, but if they could not do so, they may sell it to the private firms. A question of allowing them to export the crude will only arise when the entire crude
could not be sold domestically,” said RS Pandey, petroleum secretary.

He also said that the state government on Tuesday evening granted ‘right of use’ to Cairn to lay the crude pipeline.