Cairn, ONGC to invest USD 1.5-1.8 bn more in Rajasthan fields

Cairn, ONGC to invest USD 1.5-1.8 bn more in Rajasthan fields

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) 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 per cent 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 per cent, 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 per cent 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 per cent 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.

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