Washington: Concerned over the delays in approving a pipeline to transport Cairn India’s Rajasthan crude oil, the International Finance Corp (IFC) has asked the Indian government to take “appropriate steps” for offtake of oil when production begins in early 2009.
IFC, the World Bank’s private sector lending arm, loaned $150 million to Cairn India for developing the oil fields in Rajasthan and invested another $21 million to pick seven million equity shares in the company on the promise to begin delivering the first oil in 2009.
But the company is facing growing uncertainty as the government debates between setting up a pipeline to consuming refineries or setting up a mini-refinery at the field itself.
“This project is very important for India and (it is) in everybody’s interest to get it (production) going as quickly as possible and look forward to seeing that happen. It is important the central government takes appropriate action,” IFC CEO and Executive Vice President Lars Thunell said.
Thunell was speaking yesterday after signing an agreement with Cairn for providing additional funds for community development project in Rajasthan.
For crude oil production to start in March/April 2009, a pipeline transporting the oil to refiners in Gujarat must have been approved two months ago. Setting up a mini-refinery will take at least 48 months from the date of all approvals.
Cairn says it remains committed to producing first oil in first half of 2009 and quickly ramping up output to plateau of 150,000 barrels per day.
Oil discoveries are important for India in developing its indigenous sources of energy, especially given the large size of the Rajasthan discovery.
The Cairn find is India’s largest oil discovery in 23 years; at currently projected peak production rate it would equate to about 25% of India’s indigenous oil production and 8% of its oil import volumes.
Thunell said IFC’s loan and equity investment in Cairn “demonstrate that responsible oil and gas investment can be done in India”.
IFC and Cairn India yesterday signed a cooperation agreement to promote economic and social development in the local communities in Barmer district of Rajasthan. The IFC-Cairn Linkage Programme will establish an enterprise centre, a rural dairy development project and a child and maternal health initiative.
The linkages programme will cost about $3.5 million, with 30% contributed by IFC. As a central component of the programme, the enterprise centre will provide information and expertise on business practices to local small and medium enterprises, helping them become suppliers and service providers to the oil and gas operation and other ventures in the region.