New Delhi — Cairn India is planning to pump in billions of dollars over the next five years to search for new oil and gas and bring discovered fields on stream as the country aims to cut dependence on imported energy, its CEO Ajay Kumar Dixit told S&P Global Platts in an interview.
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The company, which accounts for about 25% of India's crude oil production, is also of the view that India would need more attractive policies to help speed up production at fields from the moment they are discovered, and that production of unconventional energy and shale gas needs to be encouraged by investor-friendly policies, he said.
"We will step up investment and also aim to bring world-class technology to further expand and strengthen our India exploration footprint. Our focus will remain on exploration and production in a sustained manner to support the vision of energy security and self-sufficiency," Dixit said.
Cairn India is India's second-biggest upstream producer after state-owned Oil and Natural Gas Corp and has set a production target of 500,000 boe/d over the next few years. Cairn is part of the Vedanta Resources Limited.
In 2018, Cairn India produced close to 190,000 boe/d of oil. The company has planned investments worth $3.5 billion over the next 3-4 years that will significantly ramp up its production.
"Directionally, we are looking for growth and we are on good track," Dixit said. "This year, the average production should be about 215,000 boe/d, but we are intending to exit the year with a run rate of about 250,000-260,000 boe/d as many of our projects are going to log in by the end of the year. We should be able to hold on to those volumes next year."
Cairn's key producing assets are Rajasthan in the country's west, Cambay off the west coast and Ravva off the east coast. Its flagship asset is the Rajasthan block, where it has made close to 40 discoveries.
"Studies tells us that there is potential for further growth in the Rajasthan block," Dixit said.
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.
Cairn's long-term vision is to increase its crude oil production share in India from 25% to 50%.
SPREADING ITS WINGS
India announced its new Open Acreage Licensing Policy or OALP in 2017 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 moves to a revenue-sharing model where the government gets a share of revenue the moment production begins.
In early 2018, India, under OALP, revived its search for oil and gas at home by offering 55 blocks spread across a total area of around 60,000 sq km in its first major licensing auction in eight years.
Cairn was awarded 41 out of the 55 blocks under the first round of the OALP auction.
It was later awarded five blocks in the second round and another five blocks in the third round. It was also awarded two blocks under the second Discovered Small Fields or DSF round.
From owning five onshore blocks with proven and probable reserves and resources of about 1.3 billion boe, Cairn has expanded its reach in India with new blocks onshore and offshore, taking its target reserves to close to 4.2 billion boe.
"The moment we discover a field, production should start immediately. That's the direction the government should take. If there's a big lag, there would be production losses," Dixit said.
"Also, we will need additional reforms, in areas of land acquisition and environmental clearance, in order to speed up the production process. We will also need to make production of shale gas and unconventional resources attractive in order to attract more funds into that sector," he added.
Reviving domestic oil consumption, attracting investment into the upstream sector and crafting a crude buying strategy amid mounting geopolitical tensions are key challenges ahead for the new Indian government as it starts office for the second term, analysts have told Platts.
While the National Democratic Alliance government is expected to speed up oil and gas reforms initiated in its first term, it will also try to find ways to push alternative and cleaner forms of energy in an effort to cut dependence on imported oil and gas, analysts said.
Dixit also urged the government to bring oil and gas under the good and services tax as soon as possible in order to boost prospects for the industry. "We are hoping that it will happen soon," he added.
India in 2017 embraced a unified tax structure across a wide range of goods and services while it kept crude, natural gas and some oil products out of the GST's purview.
Oil and gas companies have warned the move to keep it out of the GST list could affect investments in infrastructure as their input costs would rise because of the GST but they won't be able to pass on the tax burden to consumers.
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-- Sambit Mohanty, firstname.lastname@example.org
-- Edited by Wendy Wells, email@example.com