eco no mict imes.indiat imes.co mhttp://economictimes.indiatimes.com/news/news-by-industry/energy/o il-gas/cairn-india-may-get-nod-to-explore-rest-o f-rajasthan-o il-block/articleshow/25571135.cms

By Rajeev Jayaswal , ET Bureau | 11 Nov, 2013, 04.00AM IST

Cairn India may get nod to explore rest of Rajasthan oil block

|With its experience and new technology, Cairn is sure toraise the output at the block and could turn it into India’sbiggest producing f ield.

NEW DELHI: Oil and gas producer Cairn IndiaBSE 2.11 %could get the government's permission to explore theremaining two-thirds of the prolif ic Rajasthan block,which was relinquished more than 14 years ago byoperators including Shell that had previously owned theblock.

With its experience and new technology, Cairn is sure toraise the output at the block and could turn it into India'sbiggest producing f ield, surpassing Bombay High,government of f icials and industry executives said."Sustainability of the Rs 37,000-crore greenf ield ref inery project in Rajasthan is dependent on oil producedf rom this block.

We may approach the Cabinet with a proposal to allow Cairn to explore relinquished areas in nationalinterest," said a senior government of f icial.

By the time Cairn entered the block as operator, 25% of the area was already relinquished and an additional25% was relinquished within a short t ime, denying the company an opportunity to carry out optimalexploration works in the relinquished areas.

Cairn India did not respond to ET's email queries. Shell India Petroleum Development Co (SIPD) init ially heldthe 11,558 sq km block. Cairn took over as operator in 2002 and announced a major discovery in 2005. Bythen, 8,447 sq km area of the block was already relinquished as per contractual terms, of f icials said.

The Rajasthan oilf ield is currently producing 1,85,000 barrels of oil per day and has in-principle approval toraise the block's output to 3,00,000 barrels over the next three years. The remaining two-thirds area of theblock also has a huge potential, a senior executive said.

Vedanta group chairman Anil Agarwal had init iated this proposal about six months ago. In a letter to oilminister Veerappa Moily, he had requested f or restoration of the relinquished area to harness f ull potentialof the block, of f icials said. Vedanta group had acquired Cairn India about two years ago.

Agarwal had told Moily that 80% of the f inancial benef its would accrue to the government. "As you areaware, we are merely a contractor and overall our share of revenue is less than 20%. We would like tocreate signif icant value f or the government. We would like to realise your vision to do more exploration andmore oil production so our country is less dependent on imports," Agarwal had said in the letter to Moily.

The government usually re-auctions relinquished areas to avoid any controversy. However, of f icials said,the government's objective of enhancing oil and gas output would be better served by the economicaloption of retaining the old contractor rather than engaging a new one, who would have to start explorationf rom scratch without adequate understanding of the geology.

Of f icials in the oil ministry said the move would require the Cabinet's approval because it would meandeviation f rom the contractual provision of the signed contract. "The Cabinet may relax any contractualterm provided it will not adversely af f ect the government's f inancial interest," an of f icial said.