In what could help Cairn India cut down capital expenditure to the tune of $100 million, Gujarat-based Gujarat State Petronet (GSPL) would lay a pipeline to connect the Barmer block to the gas grid. Cairn India was planning to build a 200-km pipeline from its Raageshwari gas processing terminal in Rajasthan to GSPL terminal at Palanpur to evacuate natural gas. Moreover, the Directorate General of Hydrocarbons (DGH) has said the expenditure on the pipeline will not be considered “cost-recoverable” under the field development plan (FDP).
“We have recently signed an agreement with GSPL. As per the agreement, GSPL will build the pipeline in a consortium and provide us with a tie-in provision to connect to their grid. Exclusion of the pipeline from our scope of work will help us reduce our capital expenditure for the project. The pipeline is in tune of $100 million. We are progressing on the tendering process for the new gas processing facilities,” Mayank Ashar, MD and CEO of Cairn India, told FE.
The Raageshwari Deep Gas (RDG) is estimated to hold about 1-3 trillion cubic feet (tcf) of gas in-place. Of this, the estimated recovery factor is of 50%. Vedanta Group company Cairn India, which holds 70% stake in the Barmer block, and its PSU joint venture partner ONGC, which holds a 30% stake, has put forward a $694-million plan to develop gas reserves at the Raageshwari fields.
“RDG along with enhanced oil recovery (EoR) and recovery of tight oil reserves is at heart of our growth strategy. The FDP for the gas project includes the drilling of additional facility upgrade and laying of a pipeline to the existing pipeline network in the region,” explained Ashar.
The Vedanta Group company plans to produce ‘substantial’ natural gas in the next three years from the Barmer block, which is currently the biggest onshore crude oil producing asset. It has found a prolific gas field — Raageshwari — in the south of the Barmer block. Gas from the field is processed at Raageshwari gas terminal, which is situated about 80 km from the crude oil processing terminal known as Mangala processing terminal.
Cairn India has reported cash equivalents position of Rs 17,943 crore as on September 30. Ashar said the explorer continues to remain committed to creating long term shareholder value. “The company retains the flexibility to invest as oil prices improve and costs bottom out. Also as we have indicated the company aims to have healthy cash flows post capex so as to retain the ability to pay dividends subject to Board approval,” he added.