Cairn India would do well to concentrate its expertise in what it knows best—get the gas and oil from Barmer and other potential areas, and leave the shale gas/oil issue for subsequent development

In the past, exploration in mining lease areas was restricted, but now, based on the advice of the Directorate General of Hydrocarbons (DGH), the oil ministry has relaxed the rules to permit fresh exploration, the cost of which can be recovered ONLY when commercially viable discovery is made. Earlier, the cost of such exploration was the first charge, whether the discovery was viable or not!

So, in the case of the Barmer block in Rajasthan, drilling has been resumed by Cairn India, after lying low for four years. This is a joint venture, with Cairn holding 70% and ONGC the balance 30%.

The oil potential is estimated at 0.5 billion barrels and will enable this joint venture to achieve its target of 300,000 barrels per day (bpd) when full production is reached.

Currently, the production is 170,000 to 175,000 bpd but Cairn hopes to reach at least 215,000 bpd by 2013-14, a robust jump, which help reduce the continued dependence on imports to this extent.

The oil ministry, which had delayed granting this permission to explore mining in lease areas, recently received the clearance from the law ministry. This will encourage others to work on their potential areas more seriously.

Though the lease for the Barmer oil block expires in 2020, in order to lay down its far-reaching production plans and the related investments to the tune of some $3 billion, Cairn India has sought government assurance that the mining lease will be extended by at least 10 years to 2030. While views may differ on this issue, considering the exploration work, tests and trials are time consuming and expensive, the government needs to take a realistic and practical view, and consider such proposals favourably.

Cairn has also wants government assurance that it will be given the first right for refusal when it comes to exploration of shale gas/oil in the Barmer oil fields where it is already fully entrenched and operative successfully.

The company has rightfully claimed that under the NELP (the New Exploration Licensing Policy), the block should be offered to it as it is carrying on the work there (in Barmer), instead of giving the opportunity to others, which may be hindrance in its work.

In fact, once the government takes a realistic view on this, Cairn may as well consider offering its expertise to Oil India on a partnership basis, to tap heavy oil find, which has been discovered by OIL, only 400 km from Barmer. Logistics and knowledge of the area, apart from expertise in the industry, are in Cairn's favour.

In so far as shale oil and gas are concerned, should Cairn India really get into this new area, which is in its infancy in the United States itself? Besides, a basic study on this subject indicates that if and when viable discoveries are made, the explorer needs substantial quantity of water to successfully tap this shale oil or gas! 

Where would anyone go to acquire this water wealth, in abundance, in Rajasthan? Cairn India would do well to concentrate its expertise in what it knows best—get the gas and oil from Barmer and other potential areas, and leave the shale gas/oil issue for subsequent development, by which time technology may improve to reduce the dependence on water!

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)