Cairn India may start producing crude oil in Rajasthan this month before its partner resolves a royalty dispute with the federal government. Cairn India is “close to agreeing on the price of the oil with refiners who we have nominated,” R.S.Pandey, secretary in the ministry, said in an interview at his office in New Delhi.
A dispute over future royalty payable by state-owned Oil & Natural Gas Corp., a 30 percent stakeholder in the field, isn’t a hurdle and will be resolved once Prime Minister Manmohan Singh’s new Cabinet takes office, Pandey said. A 1995 license agreement requires India’s biggest energy explorer to pay the state government levies on all the oil produced at the area and the company wants payments exceeding its share to be reimbursed.
Crude from Cairn’s field will cut India’s oil import bill by as much as 7 percent at peak production of 175,000 barrels a day. Output of 30,000 barrels a day will begin in the June to August period and will increase to 80,000 barrels in the last three months of the year. Peak production will be reached in 2011. Cairn India acquired the stake in the area from Royal Dutch Shell Plc in 2002 and discovered oil in January 2004. The area called RJ-ON-90/1 comprises three fields, named Mangala, Bhagyam and Aishwariya.
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