Washington/New Delhi, July 5, 2006
— The International Finance Corporation, the private sector arm of the World Bank Group, has signed a landmark $150 million loan to Cairn Energy PLC to help alleviate India’s and Bangladesh’s energy shortage and partner in innovative community development programs in one of India’s economically underdeveloped states.
IFC’s 9-year term loan and IFC’s social and environmental due diligence have given a group of international commercial banks assurance to provide $850 million in additional 5-year term funding. The total $1 billion loan will finance UK-based Cairn’s capital expenditure program, primarily the development of its recent discoveries in India’s northwestern state of Rajasthan.
As part of the project design, IFC and Cairn will help small, local firms to provide support services such as food, transportation, security, grounds keeping and others to the oil and gas operations. They will also work with farmers in developing co-operative dairy ventures to improve production.
Somit Varma, IFC’s Associate Director for Oil, Gas, Mining and Chemicals, said: “IFC’s partnership with Cairn goes beyond the sizable financing we are providing. We are working with them on extending their leadership on environmental best practices and social development. Ensuring that local communities benefit is both key for development and critical for the long-term success of extractive industry projects.”
With a target peak production of around 150,000 barrels per day, the Rajasthan development will equal around 25 percent of India’s current oil production and about 8 percent of its current oil imports.
“Support for private sector investments in oil and gas is key to IFC's strategy in South Asia,” said Iyad Malas, IFC’s Director for South Asia. “With our investment, we are supporting the local economy and helping to satisfy India’s demand for domestically produced fuel.”
A central component of the Cairn-IFC development program will be the establishment of an Enterprise Center which will help to provide information and expertise on business practices to local small and medium-sized firms, putting them in the position to become potential suppliers and service providers to the oil and gas operation and other ventures.
The Enterprise Center is part of a joint community development program that aims to maximize positive impacts of the large-scale oil and gas projects in the Barmer region of Rajasthan where more than 20 percent of households live below the poverty line.
Sir Bill Gammell, Chief Executive of Cairn Energy PLC said: “This project is aligned with the Government of India’s objective of securing reliable future energy supplies. IFC’s sustained support to Cairn’s long-term capital needs helps provide confidence to our other investors and helped in mobilizing the $1 billion loan. IFC’s expertise on environmental and social management has been equally important to us.”
About IFC
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit
www.ifc.org
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In India, IFC’s current held portfolio is $1.2 billion, making India IFC’s second largest country of operations. IFC has been focused on supporting private sector led growth through direct investment and technical advisory support to promote growth and competitiveness in India. In FY 2005 alone, IFC committed $413 million in new investments in India.
About Cairn Energy PLC
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Cairn focuses its activities on the geographic region of South Asia. The Group holds material exploration and production positions in west India, east India and Bangladesh along with new exploration rights in India and Nepal.
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This focus on South Asia for more than a decade has already resulted in a significant number of oil and gas discoveries. In particular, the Company made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004. Cairn has now made 18 discoveries in Rajasthan block RJ-ON-90/1.
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Cairn operates Block RJ-ON-90/1 under a Production Sharing Contract (PSC) signed on 15 May 1995. The Development Area (1,858 km2), which includes Mangala, Aishwariya, Saraswati and Raageshwari; is shared between Cairn and ONGC, with Cairn holding 70% and ONGC having exercised their back in right for 30%.
Note to Editors
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Interview requests for Somit Varma, IFC’s Associate Director for Oil, Gas, Mining and Chemicals, may be directed to the contacts above
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Photos of Cairn’s operations and community programs are available upon request.