Cairn Energy in damage-control mode with DGH

LONDON: Cairn Energy has begun reconciliatory attempts even as the Director General of Hydrocarbons (DGH) is set to show cause the company for announcing enhanced oil reserve estimates. Bill Gammell, chief executive of Cairn Energy, said he was hopeful that the issue would be resolved. He said the company was in the process of evolving a mechanism to resolve its differences with DGH.

The statement, understood to be an attempt to calm down DGH after it had raised objections to the way Cairn had announced its enhanced reserves of 3.4bn barrel of oil equivalent from its field in Rajasthan without keeping Indian authorities in the loop. According to DGH, the Rajasthan find still stands at 1.8bn barrels, and any upgrade of reserves cannot be announced without the consent of the DGH.

Mr Gamell accepted that “the reserve issue is very important and it has the ability to be misinterpreted.” In a recent meeting, the company had agreed to evolve a mechanism were by DGH will be kept on board before such announcements were made public, he added. He, however, did not give details of the mechanism.

The company on Tuesday had announced in the London Stock Exchange that its reserves of crude in Rajasthan had been revised upwards and certified by a third party (DeGolyer & MacNaughton). The announcement had attracted wrath of DGH, who objected in the manner it was announced without keeping the Indian government informed. The announcement had been seen in the light of the company’s forthcoming initial public offerings (IPO) in India. The IPO is slated to be launched in December this year.

It is said that DGH is seeking legal option on the issue. Commenting on the DGH’s objection, Mr Gammell said the earlier estimate was based on the available figures in May ‘05, and since then there had been a lot of developments in the oil fields.

He hoped that such communication gap would not happen in the future. He said that he had ‘positive’ meetings with the DGH and other Indian authorities and the two sides have been looking “for a practical way forward.” Mr Gammell, and Cairn Energy India CEO Rahul Dhir met the DGH in New Delhi on Tuesday, minutes before the announcement in London.