Cairn may get 10-year extension of PSC for Barmer on new reserves

Written by fe Bureau | New Delhi | Updated: Jul 26 2014, 06:48am hrs
CairnThe Barmer block is primarily producing crude oil and country's largest onshore producing asset.
Vedanta Group company Cairn Indias case for 10-year extension of the production sharing contract for the Barmer block in Rajasthan may get strengthened with the company reportedly finding substantial new reserves in the block.

However, the company refused to give an outlook its gas production. Neither has it filed any field development plan for new gas discoveries with the designated panel comprising oil ministry officials, the Directorate General of Hydrocarbon.

The Barmer block is primarily producing crude oil and country's largest onshore producing asset. In FY14, the block produced 66.3 million barrels of oil equivalent (mboe). It also achieved a milestone production of 200,000 boepd.

Cairn is believed to have found gas reserves ranging from 3 trillion cubic feet (tcf) to 9 tcf. If it is true, 9 tcf of gas could lead to peak production of about 50-60 mmscmd. Currently, country's largest explorer ONGC is producing the same quantity of gas.

We have heard that the OC (operating committee) has given the go-ahead. But nothing firm has reached DGH yet, said an official at the regulator. The field development plan outlines the exact production profile of a block. Earlier, the DGH has turned down its request for a 10-year extension of the production-sharing contract (PSC) for its prolific Barmer block. The PSC is set to expire on May 14, 2020, and the DGH said not more than a five-year extension from that date could be given. The regulator is of the view that Barmer is primarily oil-producing and hence the contract can be extended only for five years. In case it was a gas field, the PSC could have been extended by another 10 years.

A top official at the petroleum ministry hinted that since Cairn is eyeing for a 10-year extension of PSC, it may be trying to monetise the gas


Barmer is a tight reservoir and non-continuous reservoir. Nearly, 30 wells have been drilled and gas potential has been assessed, said the DGH official.

Cairn India has found a prolific gas field Raageshwari in the south of the Barmer block in Rajasthan. Gas from the field is currently processed at Raageshwari gas terminal (RGT), which is situated at about 80 km from crude oil processing terminal known as Mangala processing terminal (MPT). The current estimates show that the Raageshwari filed could produce up to 8-15 million standard cubic metres a day (mscmd) of natural gas

Essar Projects, Corrtech Energy, Punj Lloyd, JSIW Infrastructure, Jaihind Projects and KazStroyService are learnt to have shown interest for setting up a 200-km pipeline from Cairn India's Raageshwari gas processing terminal in Rajasthan to Gujarat State Petronets storage facility at Palanpur.

The pipeline, integral to this plan, is expected to cost around `800-1,000 crore, say industry experts.

The private explorer that reported an operational expenditure of $3.90/barrel in FY14 for the Barmer asset targets to spend $2.4 billion over the next three years and believes that the entire oil cannot be taken out before 2030. Cairn has projected Barmer production to grow at 7-10% (CAGR) for the three years starting FY16.

Navin Agarwal, Chairman of Cairn India in the recently held AGM said that leveraging the gas potential of the Rajasthan block is a priority for Cairn India. While we had commenced commercial sale of gas from the block last year, there is potential for significant expansion...We have now identified that the Raageshwari Deep Gas field has significantly higher gas resources. We believe that through additional infrastructure, we can quickly ramp-up production, he told his shareholders.