Cairn plans $100 mn tender for three onshore oil rigs

Cairn Energy plans to float a tender for three onshore drilling rigs for its oil fields in Rajasthan at $100 million, which is part of the $500-million investment that it has lined up for development and construction work for the next year at these fields.

While construction work is expected to begin early next year, Cairn expects the rigs to arrive later in the year.

The three rigs will initially be deployed for drilling 30 oil-producing wells at the Mangla field, the company's spokesperson David Nisbet said.

In 2009, when production begins, another 115 wells will be drilled at Mangla. The total number of wells will go up to 160. If need arises, 65 more wells will be drilled.

Peak production from the Mangla field alone is estimated to be 1,00,000 barrels per day (bpd), while that from the entire Barmer area is 1,50,000 bpd.

The company already has two rigs working at the Rajasthan oil fields. "The rigs will initially be deployed at the Mangla oil field. It will then be extended to the other three fields," Nisbet said.

Drilling on the Rajasthan fields will begin once the rigs arrive during the later half of 2007. "All work on the fields will take off soon. We are on time to start producing crude oil from 2009 onwards," Nisbet added.

Cairn's total investment in the Rajasthan oil fields will be $1.5 billion over a three-year period. This includes $850 million that 14 international banks, including the International Finance Corporation, has extended for the oil fields. Cairn will pump in another $600 million from its initial public offer proceeds.

Earlier, there have been reports about Reliance Industries' natural gas production from its fields in the Krishna-Godavari basin being delayed due to unavailability of rigs.

When asked if Cairn too expects to face a similar shortage, Nisbet said that their rigs are going to be onshore ones and hence are easier to procure and set up compared with the offshore rigs that Reliance is seeking. "We are confident of having the rigs by next year," he added.

The company also added that it is actively considering entering the midstream sector. It is in talks with the Indian government on the possibility of laying a pipeline for evacuating the crude oil.

"There are many refineries in the north-western region of India. Laying a pipeline is possible to any one of these. We are currently undertaking feasibility studies," Nisbet said.