ONGC approves cost estimates for developing Cairn's oil field

Cairn India to invest around $350 million for developing Mangla oilfield

 With this the prolonged uncertainty over the development of the Mangla on-land oilfields— country’s one of the promising oilfields—seems to have come to an end. The ONGC, which holds 30 per cent interest in the on-land oilfields operated by the Cairn India, had earlier withheld approval to Cairn’s revised field development plan. The ONGC withheld the approval as it found its liability to pay royalty on the entire crude oil production too heavy. With the 30 pc stake in the Rajasthan oil field, the ONGC felt that the royalty burden would make the project economically unviable.

Cost of developing

After a gruelling three hour long meeting the Board of Directors of the  ONGC finally approved the rise in cost of developing Mangala field in the Rajasthan block to $2.396 billion from $1.241 billion, ONGC sources said. In addition to this, the cost of smaller adjoining fields would also rise from $261 million to $275 million, sources said. ONGC will bear 30 per cent of this cost. The Board decided that the ONGC would continue to pursue with the Government the reimbursement of the royalty it would pay on behalf of Cairn.  The ONGC had previously approved its share of investment at the original capital expenditure of $1.5 billion and operating expenditure of $1.43 billion .

But Cairn has revised the capital cost to $2.67 billion and operating expenditure to $1.52 billion besides $941 million being the cost of pipelines to transport crude oil. It is learnt that the ONGC Board took this decision as the Petroleum Ministry goaded the ONGC top management to approve the revised cost despite the project offering negative returns.
 DH News Service