Cairns Barmer plan gets okay in regulatory shift

Written by Pranav Nambiar | New Delhi | Updated: Oct 14 2013, 08:46am hrs
CairnPracticality is dawning on India?s oil sector regulators
Practicality is dawning on Indias oil sector regulators. The petroleum ministry has swung to the view that hydrocarbon producers dont need to be asked to get commerciality certificate for each well in an existing development area and is consequently set to approve Cairn Indias R5,000-crore integrated block development plan (IBDP) for its prolific Barmer block.

The move could help developers like Cairn, Reliance Industries, public-sector ONGC and others who have by now acquired significant experience with various Indian hydrocarbon basins, to reduce the lead time between discovery and production.

Petroleum secretary Vivek Rae confirmed to FE that the ministry is in favour of the IBDP for the Barmer block and said an announcement could be made shortly. Barmer is the countrys largest on-land oil field.

In April, Cairn had approached the oil ministry for a fast-track clearance of IBDP, spread over 2013-16, at its existing Barmer block.

Currently, the government does not give blanket investment approvals until the discovery has been established as a commercially viable one. Cairn claims the IBDP can reduce the lead time between discovery and production from 36 months to 18 months and enhance production of hydrocarbons in the country. According to Cairn officials, while an elaborate approval process may have been justified a decade ago, extensive exploration activity in recent years and significant experience gained with various basins, warrant a re-look at the current processes.

Cairn India CEO P Elango on April 12 wrote to the oil ministry seeking about seven changes to the current approval system. The company sought blanket investment approvals for the block as opposed to the current practice of government approving capital spending only for discoveries that are commercially viable. This would remove the requirement for the submission and approval of field development plans (FDPs) for individual discoveries.

Through the IBDP, Cairn hopes to ramp up the exploration and development works in the block and bring its production closer to the target of 300,000 barrels of oil equivalent per day (boepd) from the 215,000 boepd it targets for this financial year.

The company currently holds the 3,111 sq km at the Barmer block (RJ-ON-90/1) after relinquishing two-thirds of the area. It has made 26 discoveries so far.

The Mangala, Bhagyam and Aishwarya fields constitute Cairn Indias main assets in Rajasthan. The block was initially held by Royal Dutch Shell in 1995, which Cairn subsequently bought.

Cairn also suggested that the declaration of commerciality is redundant for further discoveries in the acreages within the existing development areas. The IBDP also seeks to allow extended well tests and modular early production systems for all feasible discoveries. This is a standard practice in the US and helps ramp up production early on.

Cairn has also called for first-level detail of plans and projects for all pre-development and development related work for the three years of the IBDP. The IBDP also includes annual work programmes and budget revisions to reduce time-consuming deliberations between stakeholders.

For Cairn, the Rajasthan block is considered a very promising one as far as potential reserves are concerned. To date, Cairns 26 discoveries in the block put its in-place reserves at around 7.3 billion barrels of oil equivalent. Under the cost-recovery model currently in force, the government earns profits from an oil and gas field only after the operator has recovered all of its investments. So, the government gives approvals only on establishment of a discovery as commercially viable.