Cairn Gets OK for Declaration of Commerciality in Rajasthan

The latest step in bringing Cairn Energy's Rajasthan oil discoveries to production by the end of 2007 has been reached.

Cairn Energy has received formal approval from the Government of India for a Declaration of Commerciality in respect of the Mangala, N-A, Saraswati and Raageshwari discoveries. The approval secures Cairn an extensive Development Area, inclusive of all development, appraisal and exploration rights, across 1,858 square kilometers of the Thar desert in Rajasthan. This Development Area also incorporates the unappraised GR-F, Kameshwari and N-R discoveries.

The Development Area, which is the equivalent size of approximately 12 North Sea blocks, is now retained until 2020 with the contractual right for extension(s) beyond that date subject to mutual agreement with the Government of India.

Work is underway on how best to develop the fields, through the Front End Engineering Design (FEED). This work is also looking at the various ways of delivering the crude to the buyers. Decisions on the preferred options are likely to be made in the early part of 2005.

At the same time preliminary work on a Field Development Plan (FDP) for Mangala and N-A has started. Cairn plans to submit the FDP to the Government in the first half of 2005.

Bill Gammell, Chief Executive of Cairn said:

"We are delighted to have secured this extensive Development Area which includes not only the Mangala and N-A fields but also other unappraised discoveries and exploration prospects. We remain fully focused on progressing the Mangala and N-A development whilst at the same time continuing our extensive exploration and appraisal campaign. An operational update on the progress of the exploration and appraisal drilling program will be given in December."

  • The Declaration of Commerciality is part of the process from discovery of the oil through to the formal process of developing the fields.
  • In order to conform to the terms of the Production Sharing Contract (PSC) additional consents and permissions will require to be obtained before production finally commences.
  • Under the PSC, ONGC now has 90 days within which to acquire a 30% interest in the development.
  • The FDP is the plan which sets out in detail how the field will be developed in the run up to production targeted at the end of 2007.
  • The Mangala discovery in the Thar desert of the North West Indian state has an estimated one billion barrels of oil in place in the ground according to Degolyer & MacNaughton, the world renowned independent oil reserve specialists.
  • The Mangala and N-A fields are planned to start production in the final quarter of 2007 producing up to 100,000 barrels per day.
  • India's current domestic production is approximately 650,000 barrels a day of which 50,000 bopd comes from the Cairn operated Ravva field. In addition, India imports approximately 2 million bopd to meet its growing energy needs.
  • Five rigs are continuing the drilling program and seismic operations are ongoing in order to ascertain the scale and size of the overall oil and gas fields on the Rajasthan acreage.