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Sunday Telegraph: Gammell to chair Cairn’s Indian arm (*another Shell management blunder)

EXTRACT: The company has been active in India for more than a decade, but it was not until 2004 that it bought, for a marginal sum, the stake it did not own in the Rajasthan acreage from Royal Dutch Shell. Cairn struck gold when it discovered the Mangala field, which holds 1.1bn barrels of oil.

THE ARTICLE

By Sylvia Pfeifer
(Filed: 03/09/2006)

Sir Bill Gammell, the chief executive of Cairn Energy, the Scottish oil and gas explorer, will become chairman of its Indian subsidiary when it lists on the Bombay Stock Exchange later this year.

Gammell’s appointment will be confirmed this Tuesday when the company is expected to announce that it plans to press ahead with a partial flotation of the business, which could take place as early as next month. The move will trigger a £2.3bn cash payout for shareholders.

Gammell announced in March that the company was thinking of listing its Indian oilfields. The Rajasthan fields contain more than 3.5bn barrels of oil, of which almost 1bn are likely to be recovered.

The IPO is expected to include Cairn’s Cambay and KG basin operations, which have a combined gross production of 170,100 barrels of oil per day.

The listing would be a remark-able climax for Cairn’s Indian ambitions. The company has been active in India for more than a decade, but it was not until 2004 that it bought, for a marginal sum, the stake it did not own in the Rajasthan acreage from Royal Dutch Shell.

Cairn struck gold when it discovered the Mangala field, which holds 1.1bn barrels of oil.

Today, Cairn’s Indian assets are worth about 90 per cent of its £3.4bn market capitalisation and analysts believe the parent company will retain a stake of at least 20 per cent in the newly listed Cairn India.

The new company will be led by Rahul Dhir, a petroleum engineer turned Merrill Lynch banker, and Cairn is also expected to announce a number of new non-executive appointments this week.

In an interview with The Sunday Telegraph, Dhir refused to comment on the details of the flotation but said he was confident it would be a success. “It’s a good time to be listing,” he said.

Dhir said the company had several factors in its favour, citing the absence of other material exploration and production companies in India and its track record.

Dhir, whose parents both worked for ONGC, the Indian state oil company, said he was excited as the story was changing “from an exploration to a production one”.

With the Mangala field alone set to deliver 100,000 barrels a day for about the next four to five years, Cairn believes that by using oil recovery enhancement technologies it could sustain the production level for up to seven or eight years.

“That’s a fantastic story,” said Dhir. “That’s what I get excited about.

“Cairn has done things which people thought was impossible.”
 
*Comment in brackets added by ShellNews.net

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