Cairn to start pumping Rajasthan crude soon to test logistics

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Final production set to begin in July-Sept quarter.

Mr Rahul Dhir
Mr Rahul Dhir

“We are trying to make sure that all logistical aspects are in place. Operationally we will be ready soon.

Our Bureau

New Delhi, March 31

Cairn India Ltd will soon start pumping out crude oil in small quantities from its fields in Barmer, Rajasthan. This is to test the logistics before final productions begins.

The company is looking at July-September quarter of the current calendar year to initially produce about 30,000 barrels a day, from its fields. In the Rajasthan block, public sector explorer ONGC holds 30 per cent stake.

Mr Rahul Dhir, CEO of Cairn India, told Business Line, “We are preparing ourselves to start crude production which we are targeting in third quarter of 2009.”

While declining to comment on whether the company would start pumping out crude from the fields in April, Mr Dhir said “We are trying to make sure that all logistical aspects are in place. Operationally we will be ready soon.”

Production plans

According to production plans, in the third quarter of 2009, output from Mangala fields will begin, which will be transported through trucks. By the fourth quarter, the company expects to increase the crude output to 50,000 barrels a day and transport crude through its pipeline network (from Barmer to Gujarat coast).

“The pipeline network will be ready by the fourth quarter,” he said. The plateau production of 1.75 lakh barrels a day from Mangala, Bhagyam, and Aishwariya fields would be reached by 2011. The peak production could be higher than the estimates.

On revenues

Asked what kind of returns in revenue terms Cairn is looking at from the fields, Mr Dhir said “we cannot speculate.”

As regards negotiations with Government nominees – Mangalore Refinery & Petrochemicals Ltd, Hindustan Petroleum Corporation Ltd and Indian Oil Corporation Ltd – for crude offtake and pricing, Mr Dhir said, “discussions are still going on.”

The Government is understood to have already about 0.7 million tonnes of crude to be lifted by the three public sector undertakings for 2009-10 and about 2.4 millions for 2010-11.

Benchmarking of the crude still remains an issue.

“The issue is still unresolved. We have to see that we get optimal price for the crude. The method of deriving a benchmark has to be very transparent and the price has to be linked to similar crude available in the international market.”

On whether, Cairn would also consider crude export, if discussions with PSU offtakers do not reach a logical conclusion, he said, “we are not in a position to take a decision unilaterally. It has to be taken in consultation with the Government.”

Reuters adds: Annual net profit of the Cairn group was $367 million, including a $356 million exceptional gain on a 4 per cent placement of shares in Cairn India Ltd, against a restated figure of $1.55 billion in 2007 that included a $1.5 billion one-off gain from its initial public offering of Cairn India.

(This article was published in the Business Line print edition dated April 1, 2009)
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