After making a success of discovering and producing oil from its Rajasthan field, Cairn India is now turning its focus to gas.
The Vedanta group company, which is now close to breaching the 2-lakh barrels of oil equivalent per day (boepd) output mark, is stepping up efforts to monetise the gas reserves in the southern part of the block and in the Rageshwari field.
“We hope to have the gas results out by the first quarter of 2015. It will be a real story,” said a top official of Cairn India, who did not want to be named. He said that based on first estimates, the reserves could be bigger than that in the Cambay Basin CB 0S2 field, which held 300 billion cubic feet of gas.
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Drilling is currently on in Rageshwari and in new deep gas prospects in the southern part of the Rajasthan block. “We are sure about the commerciality,” the official said pointing out that it was an on-shore field, which means easier logistics and cheaper cost of production.
It is also close to the developed gas market of Gujarat. Last month’s notification of the new gas pricing guidelines which will see prices doubling from the present $4.2 per mmbtu starting April 1 has made development of the new gas prospects attractive for Cairn.
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The gas will be piped out through a new pipeline that will be built parallel to the existing oil pipeline that extends to the Gujarat coast. When it sought approval for the existing Barmer-Boghat (Gujarat) pipeline which evacuates the Rajasthan crude, Cairn had, with foresight, secured Right of Use of such width as to enable it to lay another parallel pipeline in future. “Thanks to this, we can quicken the pace of getting the gas to the market as all we need to do is lay the new pipeline,” said the official.
The existing oil pipeline, which was originally built to transport 1.75 lakh boepd, is now moving close to 2 lakh boepd. Thanks to drag reducing additives used by Cairn, which are chemicals that form a coating on the pipeline and help reduce friction, the quantum of oil transported has increased.
“We can transport up to 3 lakh boepd by just adding some more boosting pumps and compressors along the way,” the official said. Last week, Cairn drilled its 200 well in the Rajasthan block, and work is currently on at the Mangala Processing Terminal to increase its processing capacity.
Cairn India’s programme to buy back shares is open now.
The company plans to buy back 17.09 crore shares, representing 8.9 per cent of its equity, at Rs.335 per share. The cash-rich company, sitting on about $3 billion, has set aside Rs.5,725 crore for the buyback.