Cairn, ONGC to invest USD 1.5-1.8 bn more in Raj oilfields

Last Updated: Wednesday, August 26, 2009 - 16:19

New Delhi: Cairn India and its partner Oil
and Natural Gas Corp (ONGC), which will this weekend start oil
production from their prolific Rajasthan fields, will invest
USD 1.5-1.8 billion more in the desert block over the next two
years.

Cairn India CEO and managing director Rahul Dhir said at
a conference call with journalists that the Mangala field will
start producing "a few thousand barrels of oil per day" from
August 29 and gradually ramp up to 30,000 bpd.

Mangala field will hit peak output of 1,25,000 bpd (6.25
million tonnes) in the first half of 2010 and together with
Bhagyam and Aishwariya, the production will top 1,75,000 bpd
(8.75 million tonnes a year) in 2011.

Dhir said Prime Minister Manmohan Singh will inaugurate
the first production train and dedicate the field to the
nation on Saturday. Oil Minister Murli Deora and Rajasthan
Chief Minister Ashok Gehlot would also attend the event.

"Cairn and ONGC have till date spent USD 2 billion (on
Rajasthan block)...in 2010 and 2011 or (in the) next two
years, another USD 1.5 to 1.l8 billion is planned," he said.

The two are investing USD 2.6 billion in developing the
Mangala field -- the largest oil find in the country in more
than two decades, and another USD 600-700 million on Bhagyam
and Aishwariya fields. Besides close to USD 1 billion is being
spent on laying a pipeline to Gujarat coast to transport the
oil to local refineries, he said.

Dhir said the first oil would be sold to Mangalore
Refinery and Petrochemicals Ltd, a subsidiary of state-run
ONGC. The oil would be trucked to Kandla in Gujarat from where
it would be shipped to Mangalore.

The trucking operations, that cost USD 10-12 per barrel,
would continue till year end by when the 700-km heated
pipeline would be constructed.

Indian Oil Corp (IOC) would start buying the Mangala
crude oil from the first quarter of 2010, he said. Hindustan
Petroleum Corp Ltd (HPCL) is the other refiner nominated by
the government to buy Cairn crude.

IOC and MRPL have been allocated 0.20 million tonnes each
in 2009-10, while HPCL would offtake 0.30 million tonnes of
Rajasthan crude.

But in the next fiscal, the offtake by the state refiner
would be far less than the production from Rajasthan, Dhir
said indicating private refineries like Reliance Industries
may be nominated to buy the excess crude.

In 2010-11, IOC would buy 1.5 million tonnes of the
crude, while MRPL would double its offtake to 0.40 million
tonnes. HPCL would take 0.50 million tonnes next fiscal.
Against the total committed offtake of 2.4 million tones, the
output would be over 6.2 million tonnes.

Dhir said the finding and development cost came to USD
3.5 per barrel and another USD 1 a barrel was the cost of the
pipeline. On top of this, operating cost would be USD 5 per
barrel.

Dhir said peak output of 1,75,000 barrels per day (8.75
million tons) will account for close to 25 percent of India`s
current oil production.

Some industry experts believe that the output may climb
to at least 2,05,000 bpd (10.25 million tonnes).

Mangala is the biggest oil discovery made in India in
more than two decades after the Gandhar find in Gujarat by Oil
and Natural Gas Corporation (ONGC).

Rajasthan oilfields will cut India`s oil import cost by
USD 6.8 billion or 7 percent, Goldman Sachs said.

Dhir said two-third of the 1.3 billion barrels of
reserves in Mangala field could be recovered from conventional
methods. Further, Enhanced Oil Recovery (EOR) scheme would
yield another 200 million barrels.

Another 10-20 percent of the 400 million barrels of
reserves estimated in tight rocks can be recovered through use
of technology, he said.

He said that negotiations on price for the initial
offtake of Rajasthan crude have been concluded with IOC and
MRPL.

The price agreed currently represents a 10 to 15 percent
discount to Brent.

The second processing train of 30,000 bpd capacity would
be ready by the fourth quarter of 2009. Train three (50,000
bpd) is progressing on target to attain Mangala plateau
production of 125,000 bpd by the first half of 2010.

Bureau Report



First Published: Wednesday, August 26, 2009 - 16:19

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