India’s oil production will get a major boost after Cairn India Ltd begins production of oil at its Barmer oil block in Rajasthan on Saturday. Prime Minister Manmohan Singh will press the button to start production of oil from India’s biggest onshore oil discovery by Cairn.
Today, India produces 680,000 barrels of oil per day (bopd) and spends close to $124 billion (Rs 600,000 crore) to import 75 per cent of its crude oil requirement. The Rajasthan oil discovery of Cairn would reduce India’s dependence on imported crude by nearly 8 per cent (Rs 48,000 crore).
The Rajasthan block comprises three main fields —Mangala, Bhagyam and Aishwariya (MBA). The initial production of oil from the MBA field — estimated to have reserves of 2 billion barrels of oil — will be 30,000 bopd and would reach 80,000 bopd by March 2010.
“At a cost of $4 billion (Rs 19,500 crore) by 2011, the MBA fields will reach peak production at 175,000 to 200,000 bopd,” a senior Cairn official said. “This is nearly 28 per cent of India’s oil production of 6.8 lakh bopd.”
The pipeline transporting this oil from the deserts of Rajasthan to the Gujarat coast will also be completed by the end of 2009, he said.
Cairn India is the operator of the Rajasthan block (RJ-ON-90/1) and holds 70 per cent interest in it, with the balance being held by Oil and Natural Gas Corp (ONGC).
At peak production, and at an average price of $60 (Rs 2,900) a barrel, Cairn India is expected to earn over $1.5 billion (Rs 7,300 crore) annually. The cost of lifting the crude from the block is estimated at $3.5 (Rs 170) a barrel, said Rahul Dhir, CEO and MD.
Rajasthan — better known for its royal palaces, princes and deserts — had not seen any “gushers” till Bill Gammell, chief executive of Scotland-based Cairn Energy started buying the rights in 1997 from Anglo-Dutch giant Shell’s oil blocks in the state. Nearly seven years later in December 2004, Cairn stuck huge oil at this Barmer oil field in Rajasthan.