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The Times: Cairn wins approval to develop Indian oilfield (


By Peter Klinger

October 19, 2004  


CAIRN ENERGY, the Edinburgh oil and gas company, was given approval by the Indian Government yesterday to proceed with the $500 million (£280 million) development of its Mangala field.


Bill Gammell, chief executive, said a decision on the preferred development option was likely to be made next year.


An operational update on progress is due to be released to the market in December. Cairn has yet to finalise development costs but last month hinted they could be $500 million.


The Indian Government’s “declaration of commerciality”, which effectively gives Cairn the right to extract the oil it has discovered, had been widely anticipated to be received by the end of the year.


But Andrew Whittock, oil and gas analyst at Numis Securities, said he had been pleasantly surprised at the size of the development area granted.


The declaration covers 1,858 sq km, including the Mangala and NA discoveries and three other unappraised oil finds.


Many of Cairn’s exploration licences on the Rajasthan desert bloc, which it bought from Shell two years ago, were due to expire next year. The granting of development rights gives Cairn until 2020 to continue exploring an area equivalent to 12 North Sea blocks. Cairn’s shares rose 8p to £14.99.


Mr Gammell has said that he wants to develop the combined Mangala/NA discoveries to produce between 60,000 and 100,000 barrels of oil a day.


The discoveries lie close to an existing pipeline that pumps imported oil to consumers in Delhi and beyond. India is one of the fastest-growing economies but is a net importer of oil.


However, a question mark remains over whether Cairn will develop the discoveries itself.


Analysts have repeatedly pointed to Mr Gammell’s track record as an explorer, and not a developer, amid suggestions that he would look to sell Cairn’s Rajasthan assets. India’s national oil company is seen as the natural buyer.


A sale would allow Cairn to return cash to shareholders and then try to replicate its Rajasthan success in Nepal, its latest exploration focus.

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