Cairn India Set to Start Rajasthan Oil Output

NEW DELHI (Dow Jones Newswires), Jan. 29, 2009

Cairn India Ltd. Thursday said it is set to begin oil production from its Rajasthan oil fields in western India and is building infrastructure to support higher-than-expected production.

Cairn India, a unit of the U.K.-listed Cairn Energy PLC, plans to start oil production from Rajasthan in the July-September quarter after commissioning its first 30,000-barrel-a-day processing train.

The smaller first train is also likely to reduce the capital expenditure planned for the Rajasthan development this year from the $1.8 billion expected earlier.

"The cost would be lower initially because we're building a smaller train," Rahul Dhir told Dow Jones Newswires by telephone.

Cairn operates the Rajasthan oil fields with a 70% interest and the remainder held by state-run Oil & Natural Gas Corp.

While it's still targeting plateau production of 175,000 barrels a day from Rajasthan, the company will build four processing trains with a total capacity of 205,000 barrels a day "to avoid any capacity constraints in the future", Dhir said.

"It's effectively preparing for higher production," Dhir said.

The Rajasthan fields are expected to reach plateau production of 175,000 barrels a day in 2011, when Cairn starts the fourth train, with a capacity of 75,000 barrels a day.

The estimated reserves at its Aishwariya field could support an increased production potential of up to 20,000 barrels a day, subject to regulatory approvals, the company added.

Cairn India is also building an $800-million pipeline to transport the waxy crude from Barmer in Rajasthan to Salaya in neighboring Gujarat province.

"Construction is well underway on both the upstream development and the crude oil pipeline," Dhir said in a statement.

The company is negotiating crude supply agreements with local refiners, Dhir said on phone. It expects the cost of production in Rajasthan to average about $3.50 a barrel, he said. The pipeline cost would be about $1.50 a barrel.

Quarterly Results

The company said it posted a net profit in the October-December quarter, compared with a year-earlier loss, helped by treasury income and a foreign currency gain.

Net profit for the quarter ended Dec. 31 was 2.36 billion rupees ($48.15 million), compared with a loss of INR139.1 million a year earlier.

Net sales for the quarter fell 21% to INR2.11 billion from INR2.67 billion year earlier.  

Copyright (c) 2008 Dow Jones & Company, Inc.