The oil ministry has approved further exploration in Cairn India's operational oilfields in Rajasthan to increase production.
“The proposal was pending with us for more than one and a half years. According to the existing PSC, the contractors are not prohibited for exploration in producing fields, however, we have given our approvals,” a senior oil ministry official said.
"Cost-recovery shall be permitted only after commercial viability of finds are established," the official added. Anil Agarwal earlier wrote a letter to oil minister Veerappa Moily seeking permission to explore remaining potential resources in India's biggest onland oilfield. The company plans to ramp up production from its Rajasthan block to 3,00,000 barrels per day.
The current production from the Rajasthan block stands at 1,75,000 barrel per day.
Cairn India is the operator of the Rajasthan block with a 70% participating interest and its joint venture partner ONGC has a 30% participating interest.
Under the production sharing contract, the block expires in 2020. Cairn wants approvals from the government so that they can planned their expenditure accordingly. The company will now be able to planned their expenditure accordingly. Cairn India plans to spend $2 billion for exploration and production of oil and natural gas in next two years.
It further plans to invest $600 million for exploration activities in the Rajasthan fields, Naveen Aggarwal chairman of Cairn India said at the company's annual general meeting.
“This step will encourage much needed exploration and will provide the right impetus to nation oil and gas industry,” an analyst said.
The Mangala, Bhagyam and Aishwariya (MBA) fields are the key assets in Rajasthan for the company. At present, the company produces oil from the Mangala field to around 150,000 barrel of oil per day (bopd). The Bhagyam field commenced its production starting this year with an output of around 25,000 bopd.