The Board of Oil and Natural Gas Copr (ONGC) today approved the revised cost estimate for developing the nation’s most prolific on-land oilfield in Rajasthan and agreed to invest around $350 million more in the fields operated by Cairn India.

The approval ends the uncertainty surrounding the development and the fields will now be put to production any time now. ONGC, which holds 30 per cent interest in the fields, had previously withheld approval to Cairn’s revised field development plan. The state-run firm’s liability to pay royalty on the entire crude oil production, although it was only a 30 per cent shareholder, had turned the project economically unviable for it. The board at its meeting approved the rise in cost of developing Mangala field in the Rajasthan block to $2.396 billion from $1.241 billion. Besides, the cost of smaller adjoining fields would also rise from $261 million to $275 million, a top company official said. ONGC will bear 30 per cent of this cost.

The official, however, said that ONGC will continue to pursue with the government the reimbursement of the royalty it will pay on behalf of Cairn.

There will be no change in the development cost of Bhagyam field, the second largest oilfield in the Rajasthan block, at $471 million. Also the cost of pipeline transporting the crude from Barmer district in Rajasthan to Gujarat cost would remain unchanged at $941 million.

ONGC’s total exposure in the project will rise from $874.2 million to $1.22 billion, he said. The decision followed the Petroleum Ministry pushing the ONGC top management to approve the revised cost despite the project offering negative returns on investment. ONGC had previously approved its 30 per cent share of investment at the original capital expenditure of $1.5 billion and operating expenditure of $1.43 billion for Mangala and adjoining smaller fields. But Cairn revised the capital cost to $2.67 billion and operating expenditure to $1.52 billion. The Bhagyam field cost would be $471 million $941 million being the cost of a pipeline to transport crude oil.