plan of Cairn India Ltd. 's to increase oil production by 20 percent of its Mangala field is delayed as the government of India reviews $ 9,600,000,000 Vedanta Resources Plc bid for the company, Chief Operating Officer, Rick Bott said.
The company "had thought at the end of the year was a reasonable time" for approval to increase production to 150,000 barrels per day of 125,000, Bott said in an interview yesterday at the headquarters in New York. The government's priority is to take a decision on the offer of Vedanta, he said, adding that he did not know when milestone to get approval to increase production.
Cairn India plans yet to bring the total production of Mangala and other fields in the state of Rajasthan to 175,000 bpd in the second half of next year, he said. Mangala is the largest onshore oil find in India in more than 20 years, according to the website Cairn India.
"This is the pain of firms sometimes have to endure when something important is waiting for approval," said DK Aggarwal, who manages $ 100 million as president of SMC Wealth Management Services Ltd. in New Delhi. "There is increased production may be significant in terms of quarterly earnings, but in the long term, production will rise if there is oil in the ground."
Cairn India shares fell 0.4 percent to 323.10 rupees at close in Mumbai trading. The stock has gained 15 percent this year compared with an increase of 14 percent in the Reference Sensitivity Index.
World's fourth-largest consumer
India is the fourth largest consumer of the world's oil and imported about 70 percent of its crude last year, according to the U.S. Department of Energy. Cairn India is separated from Cairn Energy Plc in 2007 and is headquartered in Gurgaon, about 30 kilometers (19 miles) south of New Delhi.
Under a production sharing contract for the company, the government may restrict the output speed of the field to ensure the action does not draw down too fast, "said Bott.
"Our reserves are holding a lot of good news is coming out of the reservoirs," said Bott. "It is a safe and prudent thing to do to be able to extract the oil at a slightly faster rate."
The area of Rajasthan has the potential to produce 240,000 barrels to 250,000 barrels of oil a day, Bott said.
February decision
Vedanta, a mining company based in London, agreed in August to pay as much as $ 9,600,000,000 for the majority stake in Cairn Energy's Indian subsidiary. Government of India decided in February on the supply of Vedanta, Petroleum Secretary S. Sundareshan told reporters in New Delhi on 29 November.
With production at 125,000 barrels a day, the Rajasthan fields represent about 85 percent of the Cairn India, sold in the domestic market as India is a net importer of energy, "said Bott. Customers include Indian Oil Corp. and Reliance Industries Ltd.
The company intends to drill the first of three exploratory wells for lease deep waters off Sri Lanka next year, "said Bott.
Cairn India has hired a Japanese team and expects to drill three wells at a cost of $ 50 million each in the program at sea, the first outside India, "said Bott.
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