Cairn Energy to start pumping India oil

Cairn Energy, the Scottish exploration group, said on Tuesday it will begin pumping its first oil this week from Rajasthan in western India, five years after discovering crude there.

"We are delighted that production from Mangala (oil field) in Rajasthan is due to commence this week at a government of India inauguration ceremony," Cairn chief executive Bill Gammell said in a statement.

The announcement came as Cairn also said it had swung into a loss during the first half of 2009.

Edinburgh-based Cairn aims to pump 175,000 barrels per day -- 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.

"The significant milestone of first oil production from Rajasthan will soon be achieved, five years after the discovery of the Mangala field," Cairn chairman Norman Murray said.

The new fields -- from which Cairn expects to extract one billion barrels over 40 years -- are important as India imports 70 percent of its oil needs.

Already among the world's top 10 oil importers, India, with its fast-growing economy, is expected to become the world's fourth-largest oil importer by 2025, according to US government energy data.

Oil accounts for 31 percent of India's energy consumption.

Chief executive 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 7.25 million dollars 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.