The government is set to return 8,000 square kilometres in its prolific barmer block in Rajasthan to Cairn India, according to sources privy to the matter.
The company, which relinquished these acreages over the years, has reclaimed them subsequently. Cairn India reckons that the area, which is two-thirds of its Rajasthan block, holds huge potential, as is clear from the finds in the areas at its disposal.
Cairn recently got its integrated block development plan (IBDP) for its existing acreages in Rajasthan approved by the government. It said the IBDP would help reduce the lead time between discovery and production from 36 months to 18 months. The company plans to invest about R5,000 crore in the block over the next three years as part of its IBDP.
It hopes to ramp up oil production from the block to 500,000 barrels of oil per day (bopd) from the exit production of 200,000 bopd by the end of 2013-14. Cairn hopes that if the relinquished areas come back to it, the production could be enhanced further.
To date,Cairn India's 26 discoveries in the block put its in place reserves at around 7.3 billion barrels of oil equivalent. The Mangala, Bhagyam and Aishwariya fields constitute its main assets in Rajasthan.
Originally, the Rajasthan block, RJ-ON-90/1, was awarded to Royal Dutch Shell in a pre-New Exploration Licensing Policy (NELP) round in 1995 and was subsequently bought out by Cairn. The block covered an area of 11,108 sq km. The production-sharing contract (PSC) of the block stipulated three phases of exploration totalling seven years, which ended on May 14, 2002.
As per contractual requirement, Cairn relinquished areas where it had not found any oil or gas and retained only 3,111 sq km where it had made 26 discoveries. Cairn has written to the government seeking the return of all of the 7,997 sq km it had given up, saying the area holds potential and needs to be explored.
Cairn has argued that it is best suited to explore the relinquished portions of the block as it understands the geologic formations in the block having worked in neighbouring acreages and produced oil successfully from the block. The company has also contended that the area relinquished from the Rajasthan block was held by the government and has not been awarded to a third party.
In a letter to the oil ministry dated April 5, 2013, Cairn India CEO P Elango sought the restoration of 11,108 sq km that it originally held when the PSC was signed with the government way back in 1997. “As the company has technical and scientific knowledge over the relinquished area, this would enhance the chances of exploration success,” Elango said in the letter.