The Indian arm of Scotland-based oil and gas company Cairn Energy was anything but a gusher in its debut on the Bombay Stock Exchange on January 9. Cairn India fell 14% below its initial public offering price on its first day of trading, amid worries about potential delays in production from its fields in Rajasthan in western India.
Cairn India raised $1.9 billion in its IPO, a record for an Indian company. The decline in the share price forced the company to lower the price it will receive from a pre-IPO placement last November of a 12% stake it sold mainly to Petronas, Malaysia’s state-owned oil firm.
Cairn India’s fields in Rajasthan hold an estimated 3.6 billion barrels of oil equivalent in oil and gas. But the thick oil needs to be extracted using specialized production techniques, such as the injection of hot water into the wells.
The company is embroiled in a dispute with the Indian government over who will build a 311-mile pipeline to transport the oil to market. Cairn India and the government nominee for the oil, Mangalore Refinery and Petrochemicals (MRPL), disagree on who should set up the infrastructure. MRPL says it will build the pipeline only if it gets a large enough discount on the oil.
Production from the Rajasthan fields is expected to reach 150,000 barrels a day by 2009.