New Delhi —
Cairn India is hoping that a series of recent strategic capital investments will help the company to grow its oil and gas output by more than 70% over the next two years, CEO Sudhir Mathur said.
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In addition, the company, which accounts for 27% of India’s crude output, has crafted a major capital expenditure plan — involving a spending target of $3 billion over the next two years — aiming to more than double its production as well as reserves, he said.
“It’s a good time to boost production because of rising crude prices. The investments that we have undertaken — that should help us to get an additional 120,000 boe/d to 150,000 boe/d over the next 18 to 24 months,” he said.
Cairn India is India’s second-biggest upstream producer, after state-owned Oil and Natural Gas Corp. It has set a production target of 500,000 boe/d over the next few years, compared with its current output of 204,000 boe/d. It is also targeting 3 billion boe of proven and probable reserves, against 1.3 billion boe currently over the next few years.
Cairn has three producing assets — Rajasthan in the west, Cambay off the west coast, and Ravva off the eastern coast. It’s flagship asset is the Rajasthan block where it has made close to 40 discoveries so far.
The company is also focusing on enhanced oil recovery at its Mangala, Bhagyam and Aishwarya fields as well as the Raageshwari project and a tight oil play in Barmer.
“After the success of Mangala, we have awarded contracts for Bhagyam and Aishwarya fields. We have also awarded contracts for Barmer tight oil recovery. We have already got about eight oil rigs working in Barmer,” Mathur added.
He said Cairn had started exploration in some new areas in Rajasthan, while it had started drilling in the Krishna Godavari Basin.
“We have already drilled our first well in the KG Basin. We will likely know in a month’s time on the production prospects,” Mathur said.
“We are confident of achieving our target of 500,000 boe/d over the next few years. In Rajasthan and Ravva, we can move quickly because we have a lot of infrastructure. But in the KG basin, it will take us a bit more time,” he added.
SPREADING ITS WINGS
In 2017, India announced its new Open Acreage Licensing Policy that allows bidders to carve out areas where they want to drill.
The auctions are part of an overhauled exploration licensing policy that allows pricing and marketing freedom for operators and is a move to a revenue-sharing model, under which the government gets a share of the revenue from the moment production begins.
Earlier this year, India, under OLAP, revived its search for oil and gas at home by offering 55 blocks in its first major licensing auction in eight years. The blocks are spread across a total area of around 60,000 sq km.
“We are bidding for all 55 blocks,” Mathur said. “We are hoping we will know the results by the end of the month. We are quite excited about the prospects.”
India currently does not allow crude oil exports.
Mathur said that in order to attract more overseas investors in the upstream sector, the government needed to unshackle physical trade, simultaneously allowing both exports and imports of crude oil, as well as consistent polices. In addition, various taxes on upstream production, which currently together work out to as high as 70%, also acts as a hurdle.
“The biggest thing that India needs to ensure in order to attract foreign investors to the upstream sector is contract sanctity,” Mathur said. “Investors should have some kind of assurance that clauses of their contracts will not get changed.”
Mathur said he saw the need for India to have its own oil futures benchmark, just like China, which has launched its own futures contract.
“We are such a big buyer of crude oil. We should have our own benchmark. India is now setting up a gas hub. I have urged the government to also include oil in that. For oil products, our own companies go overseas to hedge. They might as well do it at home,” Mathur said.
Cairn India sells its crude under one-year term contracts to refiners such as Reliance Industries Ltd., Nayara Energy, and Indian Oil Corp. It sells it crude under a pricing formula that works out to be about 8% below the price of Brent, Mathur said.
“Ideally, we would like to peg our prices to Brent,” he said. “But then again, it’s a buyer’s market out here because we can’t export. Our crude comes closest to Bonny Light. It’s a heavy crude but the sulfur content is quite low.”
Mathur said that while Cairn did not have any concrete plans for overseas investments, it would not rule out the possibility if some attractive opportunities came up.
In addition, the company is eyeing solar energy, he said.
“We are looking at the solar space quite actively,” Mathur said. “To start with, we want to do it at our own site in Rajasthan to meet our own incremental energy needs.”
— Sambit Mohanty, firstname.lastname@example.org
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— Edited by E Shailaja Nair, firstname.lastname@example.org