The Hindu Business Line : Cairn pins hopes on CB-X, Ambe fields

The Cairn India-operated Cambay joint venture in CB/OS-2 block in offshore Gujarat is pinning hopes on the newly discovered CB-X and Ambe fields to maintain supplies to Gujarat Gas Company Ltd (GGCL) and Gujarat Paguthan Energy Corporation private Ltd (GPEC). Ambe is likely to be developed as a satellite field.

Apart from Cairn, which holds 40 per cent, the other partners in the joint venture are ONGC (50 per cent) and Tata Petrodyne (10 per cent).

Though it entered in sales agreements for supplies of 2.12 mmscmd and 1.27 mmscmd, respectively in 2001, supplies from the joint venture was lower than the promised quantities during the last few years as production from Lakshmi - the bigger of the two currently producing fields - is on the decline. What is more, production from Gauri - the other producing field is expected to decline beginning the first quarter of 2007-08.

The failure to supply promised quantity and quality of gas already led the joint venture to offer 30 per cent discount on the contracted price.

While the threat of a further fall in supplies have already forced GGCL - a city gas distributor - to tie up additional supplies from ONGC-operated Panna-Mukta-Tapti JV and its parent British Gas, sources said that Cairn has recently communicated to its customers that they were taking steps to bring into production the newly discovered fields - CB-X and Ambe - to arrest the decline in sales.

Earning perspective

The issue is also important from Cairn's earning perspective, as both the gas sales contracts are due for renewal next year. According to one of the consumers, the current contracted supply price is $4 per mmbtu which is considerably lower than the present floor price of $4.75 per mmbtu.

When contacted Cairn India sources indicated that they were currently working on a development plan to arrest decline in production. "We are currently investing $60 million (Rs 2,700 crore) to extract further value from the block," a company official told Business Line. The plan includes drilling of four wells in the block.