Cairn India, which is developing the oilfields in Rajasthan discovered by its parent Cairn Energy in 2004, has started preliminary work on the pipeline to bring the oil to market, its chief executive said on Monday.
The company is still waiting for approval from the Indian government to claw back the $800m (£403m) cost of the 585km pipeline but Rahul Dhir, Cairn India's chief executive, said work was progressing.
The key contracts are in place and ground has been broken at the site for a facility along the route.
Mr Dhir said he had told the Indian government that Cairn was pressing ahead because "we are trusting the assurances you have given us" about cost recovery.
He reiterated that Cairn was prepared to proceed with building the pipeline even without approval for cost recovery because the price of delaying beyond the planned start-up date of the second half of 2009 would be much greater than the extra bill for the pipeline.
Mr Dhir was speaking as he gave an update on the costs of the Rajasthan development to accompany annual results from Cairn Energy, the FTSE-100 listed company that from later this month will own 65 per cent of Cairn India following the sale of further shares to raise cash for the project.
Cairn expects the cost of developing the fields, on top of the bill for the pipeline, to be $1.8bn in 2008-09, of which Cairn's share is 70 per cent.
Cairn said the increase reflected the increased production expected from the field, which is now thought to be 175,000 barrels a day.
FT comment
Cairn's problem is, having produced a showstopper with its Indian discovery in 2004, what does it do for an encore? Capricorn, the exploration arm, now 90 per cent owned by Cairn India, has interesting prospects in Tunisia, Nepal and Greenland but the latter two are probably the most exciting and they are long-term plays. Returns will be driven by the oil price and, if you believe it will stay high and go higher, the shares are still attractive. The management's record inspires optimism, too.
