Cairn Energy delivers on promise to pump India oil

Cairn Energy will this week finally deliver on a promise to pump oil in India after a quest begun by the Scottish exploration group in the 1990s, it announced on Tuesday, while next up is Greenland.

Cairn said it would begin pumping its first oil this week from the Mangala field in Rajasthan, western India, five years after discovering crude there to the surprise of many market watchers and other energy exploration companies.

"The significant milestone of first oil production from Rajasthan will soon be achieved," Cairn chairman Norman Murray said in a statement.

It was a bitter-sweet announcement as Cairn added that it had swung into a loss during the first half of 2009. It posted a net loss of 12 million pounds, excluding exceptional items, compared with a 10 million pounds profit in the first six months of 2008, as output fell 16.7 percent.

Edinburgh-based Cairn aims to pump 175,000 barrels per day (bpd) -- accounting for close to 25 percent of India's current oil output -- from its fields in the desert state of Rajasthan by 2011.

Some industry experts believe that figure could climb to at least 205,000 bpd. The company plans to pump 30,000 bpd initially.

"We are delighted that production from Mangala... is due to commence this week," Cairn chief executive Bill Gammell said in the group's statement.

Following its success in India, Cairn is moving on to Greenland.

"We firmly believe that Greenland's hydrocarbon potential can provide the next stage of the Cairn growth story and we continue to target first exploration drilling in 2011," Murray added on Tuesday.

Gammell, a former Scottish rugby star, took a gamble in the late 1990s when he sold off Cairn's North Sea assets and bet -- to the bemusement of many industry watchers -- on Rajasthan, which he believed was underexplored.

Rajasthan, better known for its royal palaces and princes, had not seen any "gushers" when Gammell started buying the rights in 1997 to Anglo-Dutch giant Shell's oil blocks in the state.

Shell had drilled 10 wells but had little to show for it and wanted an exit. It sold its final 50 percent stake to Cairn for just 4.42 million pounds in 2002.

Gammell, nicknamed Scotland's J.R. Ewing after the oil baron in the hit US TV show Dallas, refused to be discouraged when things did not go right.

Even in 2003 when Cairn had spent 100 million dollars digging 15 wells that turned out to be dry, he insisted the company would strike "black gold" in Rajasthan's Thar desert.

Gammell's belief was vindicated when Cairn struck oil in 2004 with its Mangala discovery in the remote Barmer district.