The Ashes

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September 4, 2009

Cairn India Rumored to Pay $9 a Barrel Levy to Government

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Filed under : General

Cairn India Ltd., a component of Cairn Energy Plc., is currently in talks with the Indian government over how much of a levy to pay per barrel to the Indian government because of its Rajasthan field. Although they didn’t report any final numbers, an unnamed oil ministry official told the Economic Times that Cairn India Ltd. would pay $9 per barrel that was pumped. By 2011, it is believed that the oil field could be producing upwards of 175,000 barrels a day which would bring in $1.575 million to the Indian government each day. It is also believed that the life of the oil field could bring in clear over a billion dollars.

oil-field11Output in the oil field only started last month, but it has already been producing high amounts of oil which has made investors very pleased. In Mumbai trading, Cairn India Ltd., which is an oil and gasoline provider, has risen 49 percent which is phenomenal considering the state of the economy. More impressively is the fact that it has risen over 55 percent in the main Sensitive Index. Things are apparently looking up for the energy provider.

When Cairn finally pushes oil production to 175,000 barrels a day, this single oil field in Rajasthan will account for over 20% of India’s total domestic oil production. These numbers are exceptional for the growing oil company and have caused great excitement in the investing field with numerous investors calling Cairn a must have buy.

The only way that this $9 levy could get a little expensive for Cairn is if the cost of oil continues dropping. There is speculation that it will drop below $65 in the near future and with rumors of a light energy winter, it could drop even lower than that which will pass savings onto the consumer, but hurt oil companies such as Cairn. For the time being, though, things to be looking exceptional for the oil company. In the end, it is all predominately speculation.

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