Cairn India forced to cap output from Rajasthan oilfield

Cairn India has been forced to cap oil production from its Rajasthan fields as the government is delaying approval for plans to raise output by 20 per cent ostensibly because of its standoff with the company's majority shareholder.

Cairn India produces 125,000 barrels of crude oil per day (6.25 million tons a year) from Mangala oilfield, the largest among the 15 discoveries in the Rajasthan block RJ-ON-90/1.

The company nearly four months ago had told the oil ministry and sector regulator Directorate General of Hydrocarbons (DGH) that output from the Mangala field can be raised to 150,000 bpd (7.5 million tons) without any new investment from existing facilities, sources in know of the development said.

But the plan has not been approved either by state-owned Oil and Natural Gas Corp (ONGC) which holds 30 per cent interest in the Thar dessert fields, or the DGH, sources said, adding the oil ministry too is sitting on the proposal.

India meets 73 per cent of its oil needs through imports not producing 1.25 million tons of crude oil does not agur well for the country's energy security, experts said.

Sources said Cairn India has completed drilling 74 wells but is producing oil from only 48 wells. The facilities at the Mangala field can sustain output of 150,000 bpd output.

UK's Cairn Energy Plc, which holds 62.38 per cent stake in Cairn India, had on August 16 announced sale of its 40-51 per cent stake in the company to London-listed Vedanta Resources for upto USD 8.48 billion.

Industry watchers said Cairn Energy has had differences with the oil ministry on the requirement of prior government consent and the standoff is costing the nation dear of precious oil.

Oil Ministry says it will not consider approving Cairn Energy's proposal to sell majority stake in its Indian arm to Vedanta Resources unless the UK-based firm sheds its selective approach and makes formal application for transfer of control in all its 10 properties in the country.

Cairn Energy has so far applied for government nod only its 7 exploration acerage while has kept the three producing properties including the crown jewel Rajasthan fields out of the application.

Industry watchers linked the delay in government nod for raising output to this difference between the oil ministry and Cairn Energy.

Cairn Energy has so far maintained that it is not contractually bound to seek approval for sale of shareholding in the Indian unit in the Rajasthan block, the Cambay basin gas field and the eastern offshore Ravva oil and gas fields.

Sources said the standoff has meant about 30 lakh barrels of crude oil remained inside the earth while the nation spent precious foreign exchange on importing crude oil.