Cairn Seeks Key Changes in Barmer Field Regime

Vedanta Group explorer Cairn India has sought six changes in the approvals regime for its oil fields at Barmer in Rajasthan, which, if approved by the government, could prove to be a game-changer for the domestic exploration industry by drastically reducing the discovery-to-delivery time.

The changes suggested by the company essentially suggest an omnibus development for an entire acreage instead of for each discovery made in a block.

This would do away with the multiple approvals that have to be sought before starting production each time a discovery is made. This process could stretch to three-four years from the time that a company declares a commercially viable oil or gas strike; sources quoted Cairn as arguing with the oil ministry.

Cairn sought these changes days before it announced the 26th discovery in the block on Tuesday. This is the first strike the company has made after the government in February allowed oil hunters to conduct additional exploration in a producing field at their own financial risk, with the rider that costs would be allowed to be recovered only in case of commercial discoveries.

One of the key changes sought by Cairn suggests scrapping the system of seeking individual approval for declaring a discovery as commercially viable, called 'DoC or declaration of commerciality' in industry parlance. The company has argued that this would be "superfluous" under an omnibus development plan for acreage.

Under the omnibus plan, the company has suggested replacing multiple, individual field development plans by a single integrated plan for the entire block.

To address concerns over any possible slackness in oversight of expenditure, which could adversely impact government revenue, Cairn has suggested that once the omnibus block development plan is approved, expenditure on bringing a discovery into production could be done through a 'work program and budgeting' process annually.

Another major change sought is in the joint operating agreement for the field in line with the "best global oil industry practices". State-run ONGC is 30% partner in the field and Cairn, as in-charge of operations, cannot on its own decide on contracts worth more than $500,000. This involves "cumbersome multiple touch points between partners" that delay the process of procuring equipment or services, the company has argued.

Cairn's situation is similar to many of the 260 blocks in the country under exploration or development. In block after block, companies are hamstrung by red tape, delay in approvals and differences between partners. In case the government agrees to the key changes sought by Cairn, it would have to be done as a policy measure and would take time.

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