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‘Price currently represents a 10 to 15 per cent discount to Brent’

Cairn India is all set to begin production of oil from its prolific Rajasthan field. As the pipeline that will ultimately carry this oil from Rajasthan to the coast of Gujarat is yet to get ready, CEO and MD of Cairn India Rahul Dhir speaks to Anupama Airy on various issues concerning the oil production and future investments.

business Updated: Aug 26, 2009 23:13 IST
Anupama Airy

Cairn India is all set to begin production of oil from its prolific Rajasthan field. As the pipeline that will ultimately carry this oil from Rajasthan to the coast of Gujarat is yet to get ready, Cairn will hire specialised cryogenic trucks to transport this oil to the state-owned refineries. CEO and MD of Cairn India Rahul Dhir spoke on various issues concerning the oil production and future investments in its Rajasthan field. Excerpts.

What will be the start-up production from the Rajasthan oil block’s largest field Mangla?
The Mangala field will start producing a few thousand barrels of oil per day (bopd). This will be gradually ramped up to 30,000 bopd to reach its peak output of 125,000 bopd sometimes in the first half of 2010. Together with Bhagyam and Aishwariya (the two other fields in the block starting oil production from Saturday), the production will touch 175,000 bopd (8.75 million tonnes a year) by 2011.

Give us the details of investments in the block?
So far, Cairn and ONGC have invested $2 billion (Rs 9,766 crore) in Rajasthan block. In 2010 and 2011, another $1.50 billion (Rs 7,324 crore) to $1.l8 billion (Rs 5,762 crore) is planned. Besides close to $1 billion (Rs 4,883 cr) is being spent on laying a pipeline to Gujarat coast to transport the oil to local refineries.

Have you firmed up the buyers for selling the oil produced?
The first oil would be sold to Mangalore Refinery and Petrochemicals Ltd (MRPL), a subsidiary of ONGC. The oil would be trucked to Kandla in Gujarat from where it would be shipped to Mangalore. Indian Oil Corp (IOC) would start buying the Mangala crude oil from the first quarter of 2010. Hindustan Petroleum Corp Ltd (HPCL) is the other refiner nominated by the government to buy Cairn crude.
What will be the cost of transporting the oil in trucks?
The trucking operations would cost $10-12 per barrel and would continue till year end by when the 700-km pipeline would be ready.

What is your finding and development costs?
The finding and development cost was $3.5 per barrel and $1.5 was the cost of the pipeline. On top of this, operating cost would be $5 per barrel.

Have you completed your negotiations with the refiners. At what price they could lift the oil?
Negotiations on price for the initial offtake have been concluded. The price agreed currently represents a 10
per cent to 15 per cent discount to Brent.