Cairn gets DGH approval for 4th Gauri well

Vol 7, PW 9 (16 Jul 03) Exploration & Production

ITS BEEN a long but ultimately fruitful wait for Cairn Energy in its quest for full DGH approval for this year's work programme and budget for block CB-OS/2 in Gujarat.

One of the key issues in dispute between Cairn and the DGH - ever since the work programme and budget was submitted on 28th March - is the need for a fourth development well at the Gauri gasfield, which sits within the block. Finally, on 13th June, the DGH gave Cairn permission to go ahead with the fourth well and include it in the 'firm' category of CB-OS/2 budget items for 2003-04.

Cairn and its partners ONGC, Tata Petrodyne are clear that a fourth well is necessary, but the DGH feels three are enough until proof emerges of the need for a fourth. More, the DGH was insisting it could permit cost recovery for a fourth well only if the consortium could prove it was really needed.

The DGH relented in its 7th May letter to Cairn approving the CB-OS/2 work programme and budget. "The Gauri Development Budget is subject to corresponding reduction in budget due to less number of wells approved by DGH," writes the DGH.

Cairn is allowed to budget $20.09m in the 'firm' category to drill three wells and $5.38m in the 'to mature' category for one well. Cairn is reminded that by using the, "drilling rig and its associated services from Lakshmi to Gauri field, there is saving on account of mob/de-mob costs." The DGH also cautions Cairn that, "if idle rig cost increases over mob/de-mob cost while the approved three wells are being drilled then such excess differential amount on account of idle rig time and associated support services will not be a part of cost recovery." Earlier on 22nd May Cairn wrote to the DGH telling it this was unacceptable and that unless all four wells were included in the 'firm' category of the budget, it would be unable to raise cash in time from its partners for the fourth well and that the rig Ensco-54 - costing $150,000 in hire and service charges per day - may have to sit idle during the monsoon period.

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