Cairn to Launch Oil Fields in India

MUMBAI (THE WALL STREET JOURNAL ASIA via Dow Jones Newswires), Aug. 26, 2009

A unit of Cairn Energy PLC is about to start production in fields that marked India's biggest oil discovery in decades, as the Indian government seeks to reduce its dependence on oil imports.

Cairn India is scheduled to start oil production in western India after five years developing the fields. India's Prime Minister Manmohan Singh is scheduled Saturday to inaugurate production at one of Cairn's fields in the western state of Rajasthan. Cairn and its partners have invested about $2 billion developing the fields since their discovery five years ago.

"It has been a long journey for us," Rahul Dhir, managing director and chief executive of Cairn India Ltd. told reporters in a conference call. "And it is an important part of our national energy security."

India needs more discoveries like the Cairn fields as it tries to trim its oil import bill. India imports around 70% of its crude oil. Overall demand has grown amid a booming economy, which has expanded annually from 6% to 9% in the past five years, and the dependence on foreign oil has been climbing.

Hoping to find more energy at home, the Indian government this month is putting on a global road show to drum up bids for the rights to explore other regions of the country for oil and natural gas. India-listed Cairn India is a subsidiary of London-listed Cairn Energy.

While there are few restrictions on foreign companies in oil exploration and development in India, it still took more than a year of getting bureaucratic approvals to start the project, which is why it took so long to get off the ground, according to S.P. Tulsian, an independent oil and gas analyst.

After production starts this week from its Mangala, Bhagyam and Aishwariya oil fields in Rajasthan, Cairn's fields will produce around 30,000 barrels of oil a day. The company will increase production to 175,000 barrels of oil a day over the next few years. At its peak production, the new fields will add as much as a fifth to India's oil-producing capacity.

Cairn projects that it will be able to easily pump around one billion barrels of oil out of the fields. Mr. Dhir said it could get another 10% to 20% from its wells if it uses more expensive oil-recovery technology. He said the company could be pumping oil from the Rajasthan fields for the next 40 to 50 years.

(Sonya Misquitta in Mumbai contributed to this article. )  

Copyright (c) 2009 Dow Jones & Company, Inc.