Cairn in $1-billion loan deal to develop Rajasthan oil blocks

26 July 2006

Mumbai: Cairn Energy has signed a $1-billion syndicated bank loan for developing its oil and gas assets in Rajasthan, a move that clears the path for production from the sites in 2008. Bill Gammell, chief executive of the Edinburgh-based Cairn, said the firm is looking for more investments in India and will bid for substantial new acreage in the country's forthcoming licensing round.

Cairn already has an interest in 13 blocks, but up to 50 more have been put up for grabs by the government in September's round.

Cairn Energy said it would pump enough oil and gas from a series of big finds in India and repay $1bn borrowings within 18 months of starting production. Gammell said directors had calculated that debts incurred to develop the fields in Rajasthan, including the big Mangala oil block, should be cleared "pretty fast". "We hope to repay it within 18 months (of commercial production) by around 2010," he said following the signing of the loan facility syndicated by 14 banks.

The consortium of banks that arranged the revolving facility included the Royal Bank of Scotland and Lloyds TSB Scotland among others. The Bank of Scotland corporate arm of HBOS also provided support for the revolving facility.

"We are delighted that the international banks have supported this significant inward investment into India," said Gammell.

Cairn, meanwhile, is going ahead with plans to complete an initial public offer of the Indian business on the Mumbai Stock Exchange. The timing and scale of the IPO have yet to be decided as the company is keenly watching the volatile market. However, analysts expect the company to float the IPO by the fourth quarter of this year or latest by the first quarter of 2007.