Cairn will have to return KG-OS/6 to government

Vol 8, PW 4 (19 May 04) Exploration & Production

If only Cairns success at Rajasthan could be replicated at offshore KG basin exploration block KG-OS/6.

PETROWATCH learns the ministry has refused Cairns request for a four-month extension to the third and final phase of the exploration period in this shallow water block that it shares with Petrocon, formerly Videocon Petroleum. Cairn should receive the regret letter from the oil ministry anytime now.

Government refusal to agree an extension means the block will return to the government when the term of the PSC expires on 29th June after running for six years. Given Cairns excellent exploration record in India in general and on this block in particular, the ministry took the decision on KG-OS/6 reluctantly.

Cairn did not help matters with the reason it offered in the letter seeking the extension. Cairns application said they wanted the extension to find one more partner, says a ministry source.

How can the ministry give them an extension on this ground They were very persistent but it will not be possible. Cairn has been unsuccessfully trying to find another partner on this block to share the technical risks after a string of drilling failures over two years caused by severe subsurface shallow water flows.

Cairn was asked which companies it was talking to as likely additional partners. They said they would go to companies and talk to them.

But we cant go with this. Ministry officials sympathise with Cairns predicament.

The block is good and there are some chances of a discovery at one or two locations. Cairn has spent a lot of money and exceeded the PSC work programme.

Cairn is also a very persistent company especially when theyre sure theyve got something. But, we are told, theres little the ministry can do.

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