Essar Oil has received the government approval for induction of Petrom, which will now hold 21 per cent participating interest for development, explorations and production in this exploration block, Essar Oil executive director, exploration & production divisions (E&P), Shisir R Agrawal, told The Financial Express.

Essar Oil chief executive officer (E&P) Dr Vijay Dharia said, the company has completed the seismic acquisition and data interpretation in the first phase and on the basis of this, the first well will be drilled in the current calendar year.

The company had mentioned in its annual report for 1999-2000, that it was awaiting the government nod for the induction of a partner.

Essar Oil held 100 per cent participating interest in the first phase of explorations, and has completed the committed work programme of phase-I. This block was awarded to Essar Oil in the fifth round of exploration. The production sharing contract (PSC), and the joint operating agreement (JOA) for this block was executed in October 1996.

According to Dr Dharia, the block has a prognosticated reserve of 200 to 400 million barrels of oil. The second phase of work on the Saurashtra offshore field will cost about Rs 30 crore, to the consortium. Of this, 21 per cent will be brought in by Petrom.

The production sharing contract (PSC) for the development of Ratna & R-series, has also been approved by the government of India and a formal contract is expected to be signed shortly, with Oil and Natural Gas Corporation (ONGC), the licensee for drilling and exploration.

Mr Agrawal said that the company has already initiated the joint operating agreement (JOA) with ONGC. The production sharing contract has also been initiated by Essar Oil and Premier Oil. The company has also signed crude off-take agreement with Bharat Petroleum Corporation Ltd (BPCL) and a gas sale agreement has been signed with Gas Authority of India Ltd (GAIL).

According to Mr Agrawal, the total in place reserves in the Ratan & R-series is 500 million barrels, and the recoverable reserves are estimated to be around 115 million barrels of crude and two billion cubic meters of associated gas.

The peak production, Mr Agrawal said, would be 25,000 barrels which, at present crude prices, should garner revenues of at least Rs 1,000 crore. The gas sales revenue is expected to be Rs 30 crore per year.

The capital expenditure for the Ratna & R-series will be $300 million, which will be shared in the ratio of 50:40:10 between Essar Oil, ONGC and Premier Oil. Of this, $90 million from Essar Oil will come as peak funds.

Essar Oil has also received the petroleum exploration license (PEL) for the Cachar onshore exploration block in the north-east. Dr Dharia said that the structures for this field have already been mapped, with prognosticated reserves of 350 to 750 million barrels of crude.

Recently, the company received the PEL from the government of Assam and the work on the field will commence soon. The company is yet to receive the PEL from the government of Gujarat, for Cambay on shore exploration blocks. The prognosticated reserves are estimated at 40 to 70 million barrels.