Government kills plan to halve Cairn Rajasthan output

Vol 11, PW 4 (28 Jun 07) People & Policy

Cairn India will be happy to learn that the oil ministry has abandoned plans to force it to halve future production from its Rajasthan fields.

“The government is veering around to the view that it is best to allow Cairn to retain the production profile that has already been approved,â€‌ a ministry source tells us. “We will not interfere with the field development plan that has already been cleared.

â€‌ But he adds hastily: “No formal decision has yet been taken.â€‌ This change of mind will comfort an increasingly agitated Cairn faced with reports of ministry plans to cut planned Rajasthan output from 150,000 b/d to 75,000 b/d at first start up in 2009.

Under direction from the ministry, the DGH was asked to examine several scenarios for the Rajasthan fields, among them a lower production profile and a small 4m t/y refinery. In early May this profile was sent to a panel of ministry and DGH experts for comparison with the earlier Field Development Plan that was endorsed by the government in May last year.

Their brief was to study the feasibility of a small capacity refinery within Rajasthan. The oil ministry says it has yet to receive the panel’s report but that, “the exercise has become redundantâ€‌ now that the idea is not to change the approved production profile.

“The idea behind a truncated production profile and a lower (4m t/y) capacity refinery (in Rajasthan) was to avoid the need for a heated and insulated pipeline to transport the Cairn crude,â€‌ adds our source. “The negative side is that you have to postpone production from the fields to 2010 or at least till the refinery is ready.

â€‌ Of primary concern was and still is the high cost of a heated and insulated pipeline to transport the waxy Rajasthan crude outside the field. “This sort of pipeline would cost about Rs3500cr ($777m) but a normal pipeline would cost about Rs2000cr,â€‌ says the ministry.

“We were trying to save Rs1500cr.â€‌