Cairn's pipe builder says ready Dec '09, shares dip

NEW DELHI (Reuters) - Shares in Cairn Energy dropped nearly 5 percent on Tuesday, on concerns that production of crude from its core Rajasthan fields could be delayed by late construction of a pipeline it needs.

India's leading construction firm Larsen & Toubro Ltd said on Tuesday the pipeline to transport oil from the Barmer field, owned by Cairn India in Rajasthan, would be ready by December 2009.

Cairn aims to begin production from its Mangala oilfield in the second half of 2009, and the contract for laying the 600 km (370-mile) pipeline to transport crude to Salaya in Gujarat has been awarded to Larsen & Toubro.

One trader said there were concerns the start of production would now be delayed to 2010.

Shares in Cairn Energy traded down 4.86 percent at 2837 pence at 1443 GMT, compared with a 0.1 percent drop in the DJ Stoxx European oil and gas sector index.

Some analysts have expressed doubt in recent months that the company will manage its 2009 start-up target.

"The pipeline will be ready by December 2009," L&T Chairman and Managing Director A.M. Naik told Reuters.

Cairn India owns a 70 percent interest in the Rajasthan block, while India's state-run Oil and Natural Gas Corp holds the remaining 30 percent.

A spokesperson for Cairn India, which is almost 70 percent owned by Cairn Energy, was not immediately available to comment, and a spokeswoman for the Edinburgh-based parent declined immediate comment.