The Hindu Business Line : Cairn gets nod for pipeline project

After considerable delay, decks have been cleared for Cairn India to transport its Rajasthan crude through a pipeline. The Government has approved the company’s proposal to lay a pipeline from Barmer, Rajasthan to Gujarat coast. The news saw Cairn’s share price move up to Rs 147 after opening at Rs 142.05 and finally closing at Rs 145.15 at the BSE.

Sources told Business Line that the company has received the Petroleum Ministry’s nod for right of use (RoU) on Wednesday. Among other things, this allows the company to acquire land rights for laying the 582 km pipeline and s hifting the delivery point. The next step would be to initiate the process for the RoU by seeking assistance from the State Government and the other competent authorities. The project will also benefit the State Government in terms of royalty revenues.

The pipeline project is estimated to cost $ 700 million. Cairn has already done the design, engineering and route survey for the pipeline. The cost is likely to be funded in the ratio of 70:30 by Cairn and ONGC in proportion of their equity in the fields. Apart from seeking assistance from the competent authorities, simultaneously Cairn would initiate work on brining in an amendment to the field development plan (FDP) as the project cost is to be included as part of the Rajasthan field development cost, sources added. The amendment to the FDP would need to be first approved by the operating committee and then by the management committee of the block.

Work also needs to be started on necessary approvals for selling the crude oil to multiple buyers instead of the approved scheme of supplying the entire 150,000 barrels per day produce to MRPL, the Government nominee.

Subsequent to the RoU application approval, the Ministry needs to issue a notification and give the remaining approvals. The company plans to start production from Rajasthan fields by first half of 2009. The pipeline will take a minimum of 18 months to complete.

Cairn India plans to invest about $1.8 billion in bringing to production the Mangala, Aishwariya, Raageshwari and Saraswati (MARS) finds. Another $ 500 million is proposed to be invested in Bhagyam field. The proposal has been submitted to the Directorate General of Hydrocarbons for approval.