Directorate General of Hydrocarbons Okays Cairn's Bhagyam Plan

The directorate general of hydrocarbons (DGH), the technical arm of the oil ministry, has approved Cairn India's proposal to commence production from Bhagyam, the second-largest oil field in the prolific Rajasthan block, but the ministry has still not given the go-ahead, industry and official sources said.

The company, which operates the block with a 70% stake, has been waiting for a year to obtain approvals to start production. Last week, the DGH, which is a part of the crucial management committee that oversees the block has given a nod to the proposal, sources said.

"The DGH has given its approvals to commence production from Bhagyam, along with both the management committee and the operations committee. The matter is now with Jaipal Reddy's office. My question is when the DGH has given a go-ahead, why is the matter still stuck?" said a person close to Cairn India. The management committee comprises Cairn India, ONGC and representatives of the DGH and the petroleum minister while the OC is composed of only JV partners Cairn India and ONGC. "The representatives of the oil ministry have also given their in-principle nod to commence production, so this further delay is quite nerve-wracking," the person added.

Cairn India has said it is ready to commence production from Bhagyam from the last quarter of this fiscal. "We are ready to begin production of 40,000 bpd from Bhagyam as soon as we get the approvals. All the related infrastructure including pipeline is on track," Mark Oliver Blanche, director (upstream), Cairn India had told ET in October.

Currently, Mangala, the biggest of the 18 discoveries in the Rajasthan block, is producing 1,25,000 bpd. Bhagyam is targeted to produce a peak output of 40,000 bpd by the year-end, which would help Cairn achieve the approved peak output of up to 1,75,000 bpd. The approvals have been stuck for more than a year as previously, the ministry wanted all prior entitlement issues related to the Vedanta deal to be resolved before giving Cairn a go-ahead to start production from the oil field.

Copyright 2011 Bennett Coleman & Co. Ltd.
All Rights Reserved