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would begin pumping its first oil from a huge field in western India
this week, a decade after taking a gamble on the area. 'We are
delighted that production from Mangala (oil field) in Rajasthan is
due to commence this week,' Cairn chief executive Bill Gammell said
in a statement. 'This is a major milestone for the Cairn Group.'
Edinburgh-based Cairn aims to pump 1,75,000 barrels per day (bpd) —
the equivalent of close to 25 per cent of India's current oil output
— from its fields in the desert state of Rajasthan by 2011. Some
industry experts believe that figure could climb to at least 2,05,000
bpd. The company plans to pump 30,000 bpd initially. The new
fields — from which Cairn expects to extract one billion barrels over
40 years — are important as India imports 70 per cent of its oil
needs, putting it among the top ten oil importers globally.
Gammell, a former Scottish rugby star, took a punt in the late 1990s
when he sold off Cairn's North Sea assets and bet — to the bemusement
of many industry watchers — on Rajasthan, which he believed was
under explored. Rajasthan, better known for its royal palaces and
former princes, had not seen any 'gushers' when Gammell in 1997
started buying the rights to Anglo-Dutch giant Shell's oil blocks in
the state. Shell had drilled 10 holes but had little to show for
it and wanted an exit. It sold its final 50 per cent stake to Cairn
for just 7.25 million dollars in 2002. 'This is a world-class
discovery and the potential production is certainly a good story for
India,' said Deepak Pareek, energy analyst at India's Angel Broking.
With its fast-growing economy, India is expected to become the
world's fourth-largest oil importer by 2025, according to US
government energy data. Cairn's Rajasthan fields will save around
$6.8 billion in foreign exchange payments a year, which represents
around seven per cent of India' s current oil import bill, said
Goldman Sachs. Initial output from the field will be exported by
truck, and full production requires completion of an export pipeline
to the coast in the neighbouring Indian state of Gujarat. This
second phase is scheduled to start up by the end of the year,
although the company suggested this target was increasingly
challenging. The Rajasthan oil, in which India's state-run Oil and
Natural Gas Corp holds a 30 per cent stake, lifted Cairn from
relative obscurity and turned it into a leading explorer listed on the
FTSE-100 index of Britain's biggest companies. Gammell, nicknamed
Scotland's J.R. Ewing after the oil baron in the hit US TV show
Dallas, refused to be discouraged in Rajasthan even when things did
not go right. In 2003, after Cairn had spent $100 million digging
15 wells that turned out to be dry, he insisted the company would
strike 'black gold' in Rajasthan's Thar desert. 'There's no doubt
in my own mind that this will go on to prove itself commercially
viable,' Gammell declared then as shareholder pressure mounted for
the company to give up on India as a costly white elephant.
Gammell's belief was vindicated when Cairn struck oil in 2004 with
its Mangala discovery in remote Barmer district. The announcement
came as Cairn also said it had swung into a loss during the first
half of 2009. Cairn has exploration operations in North Africa
and Greenland, whose icy waters it describes as its next 'huge
opportunity,' but most of its existing value is tied up with India.
