Days after seeking government nod to more than double its production capacity in Rajasthan, Cairn Energy announced it has started work on bringing the second field into production.
In an update given to investors in London, Cairn said it expects to start production from its second oil field — Bhagyam — by end of the year and has already drilled 30 wells.
The Rajasthan block, which covers most of Rajasthan, is comprised of around 28 different fields. A field is a single, discrete deposit of oil or gas. Currently, production is happening at the biggest field of all — Mangala — at around 125,000 barrels of crude oil per day.
In comparison, in the huge Mangala field, 143 wells have been drilled, of which 62 are currently producing — accounting for around 14% of India’s total production at present.
Cairn has an authorization from the government to produce up to 160,000 barrels while the current processing station is able to handle a maximum capacity of 205,000 barrels.
Bhagyam has an authorized production rate of 40,000 barrels per day — taking the total production to just around 165,000 barrels. Cairn has recently asked the environment ministry for permission to increase production capacity from 160,000 barrels to whopping 350,000 barrels — making it the biggest oil production facility India has ever seen.
In addition, the third big field, Aishwarya, is also being prepared for production, though it will be ready only by end of 2012, Cairn said. It also said that there is an increase in finds in the field. As a result of an increase in the estimated reserves and resources, an assessment of the plateau production potential and design optimisation of the Aishwariya field facilities is currently underway,” it said.
Cairn and its minority partner ONGC are learnt to be involved in a tussle over production rates — partly because ONGC will suffer increasing tax burden with the increasing production. Cairn is also trying to sell most of its India business to Vedanta Resources, while ONGC is trying to win tax discounts through government intervention in the deal.
There are unconfirmed reports that the validity of the stock sale deal, which is to expire by May 25, has been extended by both companies.