Cairn India to invest Rs 8,400cr in India

BS Reporter / Mumbai June 25, 2008, 20:04 IST

Cairn India, the Indian arm of British oil and gas company Cairn Energy, will invest Rs 8,400 crore to develop oil fields and build a pipeline over the next 18 months.

The company is developing oil fields in Rajasthan, which will cost it Rs 3,570 crore this year, said Cairn India Chairman Bill Gammell, at the company's annual general meeting held in Mumbai today.

Cairn India is expected to start production at its Mangala oil field in Rajasthan by the second half of 2009. Output from the Bhagyam and Aishwariya fields will start in 2010.

"Once oil starts to flow from Rajasthan, Cairn India will have the potential to account for 20 per cent of India's oil production in the next decade," added Gammell.

The three proven Rajasthan fields will produce 175,000 barrels of oil per day. India's total oil consumption is about 2.2 million barrels per day. Oil accounts for about 30 per cent of India's total energy consumption. The country imports about 70 per cent of its total oil consumption and makes no exports.

Cairn India is preparing a revised field development plan for Mangala. The plan will also include Cairn's proposal to start field trails for enhanced oil recovery to add a further resource potential of over 300 million barrels of oil.

"On March 31, the company raised its estimate for probable reserves at the Mangala, Bhagyam and Aishwariya fields by 9 per cent to 685 million barrels. Cairn India is developing 3.05 billion barrels of oil equivalent and our gross reserves are around 5.1 billion barrels," said Gammell.

The company sees operating cash flow of Rs 12,600 crore a year at a crude price of $100 a barrel. "It is very sensitive for every $20 rise the cash flow increases by about $500 million," Gammell said.

The company started construction of a 600-kilometer heated oil pipeline to transport the "waxy" crude oil from its fields in Barmer (Rajasthan) to Salaya (Gujarat).

Cairn India's scrip closed at Rs 268, up 2.80 per cent, on the Bombay Stock Exchange on Wednesday.