Cairn India oil this year – by the lorryload

Published on Thursday 29 January 2009 20:23

CAIRN Energy will use hundreds of lorries to take the first oil from its Rajasthan fields to refineries while the company completes its pipeline project in northern India.

Scotland's largest oil company is building a major pipeline from Rajasthan to the coast at Gujarat where it will be refined – and yesterday it announced it would initially transport the oil by road.

Cairn had previously said it would produce oil from its Rajasthan fields in the second half of 2009, but effectively brought forward its first oil target by three months yesterday to some time during the third quarter of the year. A spokesman for the company said the decision to truck the oil would bring forward cash flow from the fields.

Cairn's 580km pipeline is still on track to be operational by the end of the year – a construction project entailing more than 10,000 people.

Some analysts have expressed doubt over Cairn's ability to begin producing oil from Rajasthan this year, much to the frustration of the Edinburgh-headquartered company, but the risks of delays now appear to be fading. Chief executive Sir Bill Gammell said yesterday: "We will commence production in 2009 and Cairn is funded to meet this target."

If the company does produce its target of 30,000 barrels of oil a day in the third quarter, it would see several hundred trucks a day being deployed from the giant Mangala field to a port at Gujarat, a distance of about 300km.

Production will be increased in four stages, reaching a plateau of 175,000 barrels a day in 2011.

Cairn appears capable of producing significantly more, although this would require government approval.

It is building a processing terminal in Mangala that could cope with 205,000 barrels a day, which will also have scope for expansion.