The board of Cairn India Ltd (CIL) that is meeting on Thursday is likely to take stock of the loss of earning opportunity from the prolific Rajasthan oil fields due to delays in getting mandatory approvals.

Estimates peg this loss at about $56 million due to incremental production loss of 25,000 barrels a day over four months that approvals have been pending.

The estimated loss has been firmed up using an average rate of crude price at $75 a barrel. CIL had announced last October that since the Rajasthan field went on production in August-end 2009, the gross field revenue had crossed $1 billion in the second quarter of the fiscal 2010-11.

Operational delays

Sources told Business Line that the board is bound to ask questions on the operational delays and Cairn India's positioning on the entire Vedanta deal, particularly with reference to the royalty issue raised by ONGC.

“Delays in getting timely approvals from management committee (MC) of the block (RJ-ON-90/1) have had an adverse effect on the exploration, development, and production schedules of the company. The MC for the Rajasthan fields has not met for more than six months resulting in severe constraints in functioning and operational issues,” a source told Business Line .

Lower output

“It has resulted in lower production from the fields. CIL has not been able to increase production to 150,000 barrels a day as targeted from the current 125,000 barrels a day,” the source added.

Each block has a MC comprising nominees of the contractor, joint venture partner, and representatives of Directorate General of Hydrocarbons and the Petroleum Ministry. The committee approves the budget and development plan of a block.

While Cairn Energy Plc, ONGC, and the Petroleum Ministry are sticking to their positions on the issue of royalty, the worst hit has been CIL. The Government wants the issues raised by ONGC to be resolved before a go-ahead is given to Cairn Energy-Vedanta deal on stake sale.

Some of the other outstanding matters pertaining to the Rajasthan fields such as crude offtake and nomination of buyers for 2011-12 are also likely to be deliberated by the CIL Board.

Cairn Energy proposes to offload majority stake in its Indian arm, CIL, to Vedanta Resources.

Ravva gas price

Apart from Rajasthan fields, the long pending Ravva gas price revision is also likely to be discussed by the Board. The Ravva joint venture has requested for an increase in gas price to $ 4.75/mBtu. Ravva daily produces 1.7 mscmd of gas. Both lower price realisations from gas produced in the Ravva fields and the forced plateau of production by joint venture partner, ONGC, is impacting the revenues of the company, the source said.

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