The approvals mean the UK independent now retains the rights to a Development Area, until 2020, with “contractual right for extensions beyond that date subject to mutual agreement with the Government of India”.

In a statement Cairn said, “The approval secures Cairn an extensive Development Area, inclusive of all development, appraisal and exploration rights, across 1,858 square kilometres of the Thar desert in Rajasthan. This Development Area also incorporates the unappraised GR-F, Kameshwari and N-R discoveries.”

“Work is underway on how best to develop the fields, through the Front End Engineering Design (FEED). This work is also looking at the various ways of delivering the crude to the buyers [and] decisions on the preferred options are likely to be made in the early part of 2005.

“At the same time preliminary work on a Field Development Plan (FDP) for Mangala and N-A has started [and] Cairn plans to submit the FDP to the Government in the first half of 2005,” it added.

According to Cairn CEO Bill Gammell, “We are delighted to have secured this extensive Development Area which includes not only the Mangala and N-A fields but also other unappraised discoveries and exploration prospects. We remain fully focused on progressing the Mangala and N-A development whilst at the same time continuing our extensive exploration and appraisal campaign.”

On a separate note, Cairn has lost an international arbitration against the Indian government over the costs deducted by Cairn and partners Ravva Oil Singapore Pte on the offshore Ravva oil and gas field off the coast of Andhra Pradesh.

In a statement Government of India solicitor R. Sasiprabhu said, “The Indian government had questioned the correctness of cost recoveries and deductions made by Cairn Energy, the operator/ contractor of the field. Cairn Energy and Ravva Oil (Singapore) Pte had contended that they were entitled to cost recover on a current basis from the petroleum produced. They also contended they were entitled to recover cost of materials and equipment purchased but not used in operations.”

“It was specifically pleaded that these cost recoveries and deductions are not contractually permissible and has been done with a view to suppress the government’s share of profit petroleum.

“The International Arbitration Tribunal accepted government’s stand that recovery of site restoration costs without the same having incurred and/or not by creating a separate fund for the same, was contrary to the production sharing contract (PSC).

“The Tribunal also accepted the stand of the government that the contractor parties cannot recover the costs of materials and equipment until they are actually used in the petroleum operations, otherwise it amounts to government funding the operations which is in conflict with the PSC.

“As a result, the government is to benefit millions of dollars already deducted by the contractor parties in the last 10 years,” added Sasiprabhu.