Cairn to develop oil fields, build pipeline in India

Mumbai: Cairn India, a subsidiary of British oil and gas company Cairn Energy, will invest Rs 8,400 crore to develop oil fields and build a pipeline over the next 18 months.

The company will set aside Rs 3,570 crore this year for developing oil fields in Rajasthan, said Cairn India Chairman Bill Gammell at the firm's annual general meeting in Mumbai.

Cairn India is expected to start production at its Mangala oil field in Rajasthan by the second half of 2009. Output from the Bhagyam and Aishwariya fields is scheduled to begin in 2010.

'Once the oil starts to flow from Rajasthan, the company will have the potential to account for 20 per cent of India's oil production in the next decade,' Gammell said.

The three Rajasthan fields, which have proven oil reserves, are expected to produce 175,000 barrels of oil per day. India's total oil consumption is about 2.2 million barrels per day. Oil accounts for about 30 per cent of the country's total energy consumption. The country imports about 70 per cent of its total oil consumption.

Cairn India is preparing a revised field development plan for Managala.

The plan will also include Cairn's proposal to begin field trails for enhanced oil recovery to add a further resource potential of over 300 million barrels.

'On March 31, the company raised its estimate for probable reserves at the Mangala, Bhagyam and Aishwariya fields by 9 per cent to 685 million barrels,' said Gammell.

The company expects an operating cash flow of Rs 12,600 crore a year at a crude price of $100 a barrel. 'The margins are elastic. For every $20-per-barrel rise, the cash flow increases by about $500 million.'

The company started construction of a 600-km heated oil pipeline to transport the 'waxy' crude oil from its fields in Barmer (Rajasthan) to Salaya (Gujarat).