Cairn India gets govt nod for raising Mangala output

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After more than 6-month wait, the government on Thursday gave approval to Cairn India to raise output from its largest oilfield in Rajasthan block by 25,000 barrels per day to 150,000 bpd.

Rajasthan block oversight committee, called Management Committee, at its meeting on Thursday approved raising Mangala oil field production from 125,000 bpd to 150,000 bpd, sources privy to the deliberations at the MC meeting said.

Cairn is likely to jack up output at Mangala to 150,000 bpd in next few days. Together with over 25,000 bpd of output from Bhagyam, the second largest of the 25 oil and gas finds in the Rajasthan block, the Thar dessert block currently produces over 150,000 bpd and in the next few days production would rise to at least 175,000 bpd.

MC is headed by Director General of Directorate General of Hydrocarbons (DGH) and has representatives of the oil ministry.

It approved the increase in Mangala output after independent studies confirmed 1.29 billion barrels of oil equivalent reservoir's ability to produce at higher rates on a sustained basis, sources said.

The Reserve Estimation Committee of state-owned Oil and Natural Gas Corp (ONGC), which holds 30 per cent interest in the Rajasthan block, too had approved of higher in-place reserves in Mangala and raising output.

DGH had asked for an independent third party study of the reservoir and a separate report on the adequacy of surface facilities to handle higher output before approving an output increase that has been pending for over six months now.

Houston-based Knowledge Reservoir certified 1.29 billion barrels of oil equivalent in the Mangala reservoir, the second such certification after renowned Gaffney, Cline & Associates (GCA) gave a similar assessment.

Technip in a separate study approved adequacy of surface facilities to handle 175,000 bpd of production (150,000 bpd from Mangala and another 25,000 bpd from Bhagyam oilfield, the second largest of the 25 oil and gas finds Cairn has made in the Barmer basin block in Thar desserts of Rajasthan).

Cairn had on March 30 written to the Oil secretary G.C. Chaturvedi saying it had commissioned Train-3 or third plant at the Mangala oil processing facility to raise capacity to handle over 175,000 bpd of crude oil.

"Production from the Mangala field can be enhanced by 25,000 bpd with immediate effect by hooking up the spare capacity wells which are lying idle. This does not involve any additional capital expenditure," it wrote.

Also, the pipeline which transports Rajasthan crude to refiners like Reliance Industries can 'safely transport the additional volume of crude oil,' it had said.

Cairn had informed the Oil Secretary that Mangala offtake rate can be enhanced by 25,000 bpd with immediate effect.

"We are, however, constrained to highlight that delay in approving the increase of production by 25,000 bpd is likely to accrue a loss of revenue of approx. Rs 5 crore per day to the government of India.''

"In addition, the government of Rajasthan would lose the royalty income of approx. Rs 2.5 crore per day. Further, the Government of India will continue to incur foreign exchange expenditure of approx. Rs 12.5 crore per day, due to continuous requirement to import corresponding volume of oil," it wrote.

Cairn asked the Oil Secretary that it be allowed to immediately enhance Mangala production by 25,000 bpd in 'the national interest', while the process of formal approval continues.