Vedanta Resources Chairman Mr Anil Agarwal has sought Prime Minister Dr Manmohan Singh’s intervention so that his group firm Cairn India is allowed to explore oil in the prolific Rajasthan block.

Cairn India is looking to increase Rajasthan field output from current level of 175,000 barrels per day to 300,000 bpd (15 million tonnes per annum) and has made an application to the Oil Ministry seeking permission to explore within the ring-fenced development area that contains 25 oil and gas finds.

“The Rajasthan Production Sharing Contract (PSC) and the mining lease have enabling provisions that allow carrying on exploration in development area; however, we have been asked to obtain government approval,” Mr Agarwal, whose group had last year acquired Cairn India, wrote to Prime Minister on July 6.

The 3,111 square kilometre development area was ring-fenced from an exploration area more than three times its size after discoveries were made.

The Directorate General of Hydrocarbons (DGH) had taken a view that exploration is not permitted within an area that has been delineated after discoveries for production of hydrocarbons.

“As exploration is continuing in other producing blocks in the country, we request government approval for exploration in Rajasthan to enable us to achieve the full production potential,” Mr Agarwal wrote.

Cairn says the PSC defines a development area as one that not just includes a discovery or a group of discoveries but also “area of potential petroleum deposits”.

The exploration it wants to undertake is additional to the investment it is making in developing MBA fields and 22 other oil and gas finds in the 3,111 sq km area delineated as development area.

All investments that Cairn, which holds 70 per cent interest in the Rajasthan block, makes in exploration and development is first recovered from revenues earned from sale of oil. Profits are split with the government only after the entire investment is recovered.

State-owned Oil and Natural Gas Corp (ONGC) holds the remaining 30 per cent stake in the Rajasthan block.

“We have also discovered gas in the Rajasthan block and we will put all our efforts to bring that into production as quickly as possible. However, this also requires further exploration work,” Agarwal told the Prime Minister.

“Our exploration team and infrastructure is waiting eagerly to proceed with exploration activities at full pace.

Each day lost in exploration cannot be recovered and since exploration is an integral part of production, we may be allowed to continue exploration activities in Rajasthan,” he added.

(This article was published on July 22, 2012)
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