23-07-08 Cairn India said that it began the construction of the country's first heated oil pipeline, to transport "waxy" crude from its Mangala terminal in Barmer in Rajasthan across 590 km to Salaya in Gujarat.
Engineering and construction major Larsen and Toubro is laying a 24-inch pipeline for the Indian subsidiary of Cairn UK. Cairn is considering extending the pipeline to Bhogad, 80 km from Salaya, which is in close proximity to the Marine National Park, to avoid any environmental hazard to the area. The pipes are being manufactured by Jindal Saw at a contract value of approximately $ 200 mm.

GE Energy of Austria has bagged the order to manufacture 32 reciprocating gas engines for the pumping stations from Cairn India for its cross-country, heated oil pipeline currently under construction in India. The gas engines are being built at GE Energy's gas engine manufacturing centre in Jenbach, Austria. Delivery is scheduled to commence from September 2008 to February 2009, with commercial start-up at Cairn's pipes expected to begin in June 2009.
This project is not only GE's largest engine order in India, but also the global oil and gas industry's first use of Jenbacher technology to support a heated crude pipeline project.

In 2006 Cairn decided to take on the huge financial and logistic commitment involved in building a pipeline. The fate of the Rajasthan project was shrouded in uncertainty for months as the partners debated how to get the reserves discovered by Cairn to market.
State-owned ONGC has a 30-% stake in the project and has favoured building a refinery in Rajasthan to process the output. An adjoining, 8-inch natural gas pipeline also is being built.

Once in operation, the Rajasthan field is expected to produce 175,000 barrels of oil per day, bringing about an increase in the oil production levels for the Cairn India company and making a significant contribution to reducing India's current oil supply and demand imbalance. The oil pipeline is to be completed by the second half of 2009.
About 32 intermediate power feeding and heating stations will be built along the length of the pipeline. These stations will help in maintaining the required temperature (above 65 degrees) within the pipeline. A dip in the temperature could lead to coagulation of the crude oil.

Cairn earlier increased its estimate of original oil in place in its Rajasthan acreage in north-western India to 3.5 bn bbl from 2.5 bn bbl. Cairn India, with a $ 2 bn revised development plan for Mangala field in the next 18 months, is expected to be one of India's biggest beneficiaries of rising oil prices because it can sell at market rates unlike state-run rivals, whose selling prices are controlled.
The company will spend $ 850 mm out of the planned investment this year to develop its fields in Rajasthan, in western India.

Cairn expects an operating cash flow of about $ 2 bn from its Rajasthan fields, at crude price of $ 60 a barrel.
With an increment of $ 500 mm for every $ 20 rise in the price of crude, Cairn will have annual cash flow of around $ 3 bn, at crude prices of $ 100 a barrel.