Cairn India has decided to more than double its investment in three blocks out of the 25 oil discoveries in Rajasthan. It now plans to spend $3.8 billion instead of the $1.5 billion approved earlier.

When the earlier cost was arrived at in 2005, the peak production was estimated at 125,000 barrels a day, while the revised figure has gone up to 175,000 barrels per day. There has also been an increase in the cost of equipment, facility, drilling and manpower, said an official of ONGC, which has a 30 per cent stake in the Rajasthan fields.

The development cost of the Mangala, Bhagyam and Aishwariya fields is proposed at $2.9 billion, against the previously approved $1.5 billion. Another $940 million would be invested in laying a heated pipeline from Barmer to the Gujarat coast, the official added.

Cairn India had said last week that it would start producing 30,000 bpd from Rajasthan in the September quarter. The company, a unit of UK firm Cairn Energy, said supplies would rise by 50,000 bpd in the fourth quarter, when its pipeline becomes operational, and output would jump by another 50,000 bpd in first half of 2010.

A Cairns spokesman had earlier said that after months of delay, the Rajasthan government had approved the company's plan to build a 600-km pipeline from its Mangala fields to its delivery point in Viramgam in Gujarat, as the company agreed to invoice oil sales in the state rather than in Gujarat. "This essentially means that Rajasthan will get the sales tax rather than Gujarat," said a senior state official.

Seeks more land: In a letter to the union government, Cairn India has sought an additional 238 sq km of land adjacent to the area where it recently made three new discoveries, Kaameshwari West 2, 3 and 6. The company claims that the discovered oil resources of Kaameshwari 2 field extend "significantly'' beyond the existing boundaries of the field.

In the letter to the oil ministry, the company's managing director and chief executive officer Rahul Dhir sought the government's approval to acquire the area that extends beyond the current contract boundary of the oil field in Barmer, Rajasthan, in line with the terms of the production-sharing contract.

State-run oil cos take priority: State-run Indian Oil Corporation has said it may buy 1.5 million tonnes a year, or 30,000 barrels per day, of crude oil from Cairn after it starts production at its Indian fields this year. "We can buy up to 1.5 million tonnes of Cairn's Rajasthan crude, but this is subject to commerciality and pricing," IOC director for refineries B N Bankapur told reporters on Wednesday.

Bankapur said IOC's Koyali refinery in western India could process up to 20,000 bpd of Cairn's crude, while its Panipat refinery could use about 10,000 bpd from Cairn.

Petroleum secretary RS Pandey said state-run firms such as IOC, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd would get first priority in processing Cairn's crude oil.  He said if state firms do not buy the entire output, private firms like Reliance Industries and Essar Oil can use the crude oil, and if there is still a surplus, the government would consider allowing exports.

But, with India currently importing 70 per cent of its crude oil requirements, such a possibility seems remote.