The Rajasthan government has laid claim on Cairn India’s Barmer gas, making it difficult for the Anil Agarwal Group company to sell the fuel outside.

Speaking to BusinessLine, a senior Rajasthan government official said: “We have written to the Ministry of Petroleum and Natural Gas that the gas produced from the Barmer fields should be first allocated to Rajasthan, particularly for the power sector.”

In fiscal year 2015, average gas production from Raageshwari Deep Gas field in the block was 0.4528 mmscmd (million standard cubic metres a day), which Cairn expects to raise to 0.7075 mmscmd by fiscal 2016. The State has made its claim not only for the existing output but also any incremental gas that Cairn produces from the producing fields.

Cairn and ONGC, partners in the Barmer block, have more than doubled their gas production estimates from the Raageshwari fields. According to estimates drawn by the partners, the cumulative gas production till May 2020 will help meet almost 2.5 mmscmd or 90 mmscfd (million standard cubic feet a day) of gas demand — both sales plus internal.

$690-million plan ONGC and Cairn have drawn up a $690-million plan to develop the gas reserves in the Raageshwari Deep Gas field. Of the total, about $243 million is earmarked for drilling and completion of new wells, while $311.20 million is allocated for surface facilities and laying of pipelines.

To implement this, Cairn needs the State Government’s approval, and the plans will be hit if the demands of the Rajasthan government are not met, sources associated with the project fear.

According to power industry calculations, 4 mmscmd of gas is needed to generate 1,000 MW of electricity, so 0.452 mmscmd will help generate about 110 MW. With constrained domestic gas output, industries dependent on the fuel have to resort to imports, which are not cheap, despite the fall in global prices.

Besides, the gas project depends on Cairn’s proposal to get another 10-year extension as the contract for the Barmer block expires in 2020. According to the Rajasthan contract, the operator can get unconditional extension for five years if it is producing oil, and 10 years in case of expected gas production. Barmer is essentially an oil producing block.

Though the production sharing contract — signed between the government and the operators to develop and produce hydrocarbons — for the Barmer block ends in May 2020, the joint venture has prepared a profile till December 2030, indicating cumulative gas production of 358.9 billion cubic feet with a resultant recovery factor of 46.8 per cent of initial gas.

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