Cairn India is all set to start crude oil production from its prolific oil field in Barmer, Rajasthan, the company said in a letter to the petroleum ministry.

Initial oil production is expected to be around 4,000-5,000 barrels per day and the company plans to dispatch this in tankers to the nearest refinery proposed by the government.

Cairn, however, said the government was yet to find a buyer for the crude oil.

Under the production sharing contract with the government, the government has to appoint the buyers for the crude before actual production starts.

While the government-nominated Mangalore Refinery and Petrochemicals Ltd was unwilling to take anything more than 1.02 million tonnes out of the peak output of 8.75 million tonnes, Reliance Industries has placed a demand for 30,000 to 60,000 bpd (1.5-3 million tonnes) of Cairn crude.

Essar Oil has written for 30,000 bpd this year and 120,000 bpd (6 million tonnes) by 2011 when it expands its Vadinar refinery in Jamnagar district.

The Mangala field, the first of the three Cairn discoveries, is expected to produce 30,000 bpd by the second quarter of 2009-10 fiscal. Production will ramp up to 80,000 bpd by the end of 2009 before reaching a plateau of 125,000 bpd during H1 of 2010.

Besides 125,000 bpd of Mangala, the adjacent Bhagyam field would produce 40,000 bpd and Aishwariya another 20,000 bpd. The peak of 175,000 bpd would be reached in 2011.

Peak output of 8.75 million tonnes a year from the Mangala, Bhagyam and Aishwariya fields is to first go to state refiners but so far only one-third of the peak output has been claimed by state refiners, they said.

Since the Cairn crude was waxy, older refineries need to put up infrastructure to receive the oil and the lapse on the petroleum ministry's part in finding buyers can derail production plans.

The best option then is to sell initial production from Mangala field in the Barmer district to reliance refineries in Gujarat.

Cairn is setting up processing facility and a heated oil pipeline investing a total of around $1.65 billion. The heated oil pipeline would run from its fields in Rajasthan to the port of Viramgam in Gujarat.

Cairn India, the subsidiary of UK-based Cairn Energy, holds a 70 per cent stake and is the operator of the Rajasthan block. ONGC is its partner, with a 30 per cent stake.

On Tuesday, Cairn India announced the appointment of Edward Story as a non-executive director of the company with effect from 18 March 2009.

Story is the founder, president and chief executive of Soco International plc, an international exploration and production (E&P) company listed on the London Stock Exchange. Soco International has E&P interests in South East Asia and Africa.

Cairn India is headquartered in Gurgaon on the outskirts of Delhi, with operational offices in Chennai, Gujarat, Andhra Pradesh and Rajasthan.