Cairn India on Monday said the expected government nod for drilling exploration well in its Rajasthan oil fields may help it raise output from the prolific fields to 300,000 barrels a day from the current 175,000 bpd.

It had made an application few months ago to the Oil Ministry seeking permission to explore within the ring—fenced development area that contains 25 oil and gas finds.

The ministry had so far not allowed the company to explore for oil even though the contract for the block allowed such an activity.

“Our Production Sharing Contract is a pre—NELP contract and exploration is allowed within a development area,” Cairn India CEO P Elango said on the sidelines of the World Energy Policy Summit here.

The ministry is mulling granting permission to drill exploration wells within an oil and gas field but with the condition that cost recovery of such wells would be allowed only in case there is a commercially exploitable discovery.

Besides Cairn, Reliance Industries too has proposed to drill exploration well in its flagging D1&D3 gas fields in the eastern offshore KG—D6 block to reverse the falling output.

The ministry’s technical arm DGH had previously opined that such activity in an area that is producing hydrocarbons is not permissible under PSC.

DGH felt the government’s profit share, which is triggered when an explorer recovers all his cost, would be adversely impacted if new costs are added.

“We have stated this before... exploration is continuous process and allowed in development area (or a producing field),” Elango said.

Cairn, he said, will produce “a majority” of 240,000 bpd approved production rate by next year.

(This article was published on November 26, 2012)
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