Cairn On Its Production, Exploration And Future Outlook | NDTV Profit
#Cairn Oil And Gas' Deputy CEO Steve Moore and CFO Hitesh Vaid talk about company's existing production, future outlook and challenges in the industry.
Watch them in conversation with Vikas Srivastava.
For the latest news and updates, visit: ndtvprofit.com
Watch them in conversation with Vikas Srivastava.
For the latest news and updates, visit: ndtvprofit.com
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TVTranscript
00:00 Hello, I am Vikas Shrivastava. We are with the Kain Oil and Gas, the Vedanta Group's
00:07 oil and gas company. Deputy CEO is here as well as the CFO. We are going to talk to them
00:12 about their existing production, the way they are planning to ramp up their production as
00:17 well as what are the challenges in the industry that they are facing. Welcome to NDTV Profit
00:22 Minister Steve Moore.
00:23 Thank you.
00:24 So just wanted to start with by asking you what are the new technological developments
00:30 or ramping up of production as far as it is concerned. What new technological developments
00:37 are happening in this field and how you are planning to raise your production?
00:41 I mean Kain as you know works across exploration, development and production. So we are focusing
00:47 on all those areas to underpin the growth. So in the exploration we are moving into new
00:53 areas such as the North East. We are just about to kick off a major campaign across
00:57 four blocks. We will drill nine or ten wells in the North East. We are also looking at
01:02 new exploration areas on the East Coast close to our existing Rava assets and also in deep
01:08 water and similarly on the East Coast around the Kambe field and the DSF that develops
01:14 more field blocks that we have picked up in that area. Of course we will also be doing
01:18 further exploration and a lot of appraisal work in Rajasthan where we have had 38 discoveries
01:24 over the last ten or so years and we are trying to fully quantify what is there. On the development
01:30 side a lot of the development will come out of that exploration work but also from the
01:36 discovered small field blocks particularly the G4 block which we are actively developing
01:41 on the East Coast and the Ambe block on the West Coast. We are also bringing into operation
01:48 some of the fields that have been discovered over the last ten years. Durga which was a
01:54 discovery from two years ago in the OALP rounds in Rajasthan was commercialised yesterday.
01:59 We just brought it on stream and we have got a plan to go to a 2004 discovery called Shakti
02:05 which is a heavy oil field that needs thermal techniques this year as well. On the technology
02:12 side we continue to apply the technologies that I think Cairn is famed for which is the
02:17 polymer flood that we have started in Mangala that we are expanding to all the fields and
02:22 then we are building on that to add to the polymer mix a surfactant. Surfactant is effectively
02:28 something that washes the reservoir and can get you very high recovery factors. The other
02:33 technology that we are working to implement that hasn't been implemented so far in Rajasthan
02:39 is taking carbon dioxide and putting that back into the reservoir and flooding the reservoirs
02:44 with CO2. That gives also very high recoveries but a lower cost but it can only be used in
02:51 our deeper fields. But it also is an opportunity to take the CO2 that we are currently venting
02:57 which is obviously not good for the environment, harness it and it is a key part of our path
03:02 to net zero which we are trying to achieve by the end of the decade. You also wanted
03:09 to reach India's almost 50% of total production capacity. You are at around 500 million barrels
03:15 per day kind of thing because some two years back that was the plan. So what is the status
03:21 on that and how soon can we expect that to happen? It is obviously a hard process to
03:28 ramp up production. So I think for our existing discoveries we will make a big step in that
03:35 direction and we will start to see production growing but that will be backed up by the
03:39 exploration successes that we are expecting in the northeast. So I think we need to put
03:45 a timeline together. If we are looking at getting to 200,000 barrels a day we are looking
03:50 at the 3-5 year horizon. Beyond that I think that needs either a breakthrough in our deep
03:57 gas potential. We have huge deep gas potential in Rajasthan. We are going to drill a well
04:01 this year. If that is successful that will trigger a further ramp up and also if we can
04:08 bring online rapidly some of the discoveries we expect to make in the northeast that will
04:13 be another stepping stone up to a target of 250 or 300,000 as we obviously aspire to achieve
04:19 eventually. Since all these activities that have been planned up right now this would
04:24 require massive investments also. So what is the kind of investments that you are looking
04:28 at over the next 3-5 years and how you are applying to fund it? For us our vision as
04:37 Steve said is to contribute to 50% of India's production and one of the reasons is we want
04:41 India to be at least 50% self-sufficient in its energy requirements. I think what we have
04:47 done last 3-4 years is build a portfolio. From 3 producing blocks now we have 62 blocks
04:52 spread across the country both onshore and offshore. Our acreage is in excess of 60,000
04:57 square kilometers. So one part of the job we have already done is building the portfolio.
05:02 Second is bringing the right set of people. So last one year we have brought people from
05:07 across the world having the specific skill sets. And the third part now is for us to
05:13 start executing those projects. We have taken the last few months trying to work out the
05:20 plans and as Steve said our focus now is in exploration, in development and as well as
05:28 in-field wells for our producing fields right across whether it is in Northeast, whether
05:32 it is in Cambe, whether it is in Rajasthan or our offshore blocks. Now the most important
05:37 part is on the amount of capex investment. This we know will require substantial effort.
05:44 We intend to spend say around $4 billion over the next 3-4 years and this is the number
05:49 which we have spent in the past when we were building the Rajasthan facility as well as
05:54 bringing that into production. That was our first step to reach to 25% and that time annually
06:00 we used to spend in excess of a billion dollars and we achieved that target. Now this is our
06:05 second part of our journey where we are trying to replicate the same thing. The only advantage
06:09 as I said now we have a big portfolio, 62 blocks, a large amount of activity and the
06:16 onus now is on the management team to start executing those projects.
06:21 So as far as shale development is concerned you all wanted to increase your shale production
06:26 also. So given that crude is very volatile almost around 75% at times 80% 82% so at this
06:34 level do you think that you all can take shale activity? What is the status right now on
06:38 that?
06:39 So I think obviously shale is a big opportunity not only for us but for India and we have
06:44 seen what has happened in US. The advantage Cain has is as far as processing facility
06:50 is concerned whether for oil and gas we have abundance in Rajasthan. We have built a large
06:55 scale facility so the advantage which we have is we don't have to build these facilities
06:59 either to process or to transport and that's why what we are focusing on is drilling wells
07:05 ensuring that whatever we have as shale resources to look at the quantum and how do we put them
07:11 into production and that will require a lot of, it's not more about cost it's more about
07:16 technology so how we are able to implement those technologies. We did some work last
07:20 year and this year in the next 6 months we are trying to do couple of more wells and
07:26 that will give us a flip to what more we need to do to make it commercial. So I think pricing
07:30 80 dollars I think it will work for us.
07:33 What is the current production as in what is the total number of wells that you all
07:36 have drilled as of now and how many more will be drilled?
07:40 See we have over the last, our total well count is in excess of 800-900 wells across
07:45 Rajasthan in our offshore asset. What we intend to do every year is try to drill at least
07:52 75-80 wells so that's the plan and compared to past obviously this is increasing and this
07:58 is required because we intend to now grow our production and as I said we now have the
08:02 portfolio to drill so many more wells.
08:03 So out of 4 billion dollars that you said how much will go towards shale and new discoveries?
08:08 See in the initial phase it will be say for shale it will be say around 100 million because
08:13 you know that's the initial phase but more importantly the investment will be on exploration
08:17 as well as developing those exploration and a part of it in doing more wells in our existing
08:22 facility and if shale is successful this CAPEX will ramp up. It will be further more. In
08:28 our current production plan we are not counting shale as of now.
08:32 So when we quoted numbers we are not really factoring in the shale because we haven't
08:36 demonstrated its commerciality. If it does come off as we hope it will then we may have
08:42 to drill 200-300 wells so that's 5-6 million dollars a well so it's a huge investment but
08:49 it's a big increase in the production as well because as Hitesh said we have the facilities
08:55 there and we will be able to make use of those facilities and further expand the facilities.
09:00 What is the kind of reserve that you will have seen for shale in your fields?
09:05 Again it's early days to quantify it but if we take the area and we take the thickness
09:11 where we think the shale exists and we look at analogues from North America then we have
09:16 three basins. Each of those basins could contain 2 or 3 trillion cubic feet of gas that could
09:23 be developed but as I say early days we have to go and drill some more wells across the
09:30 basins and understand the amount of organic matter in the shale and whether we can really
09:36 frack it. Now obviously we have a lot of expertise of fracking because we are fracking a lot
09:40 of the other reservoirs. We are taking technologies we have already brought into India, we are
09:45 applying them just slightly deeper than our MBH, ABH developments that are already ongoing.
09:52 And given that government has come out with several OLP rounds, so what is the kind of
09:59 challenge that you see for players like you, upstream players like you in the industry
10:04 and also what is the kind of outlook you portray for companies like you?
10:08 I mean from the exploration side I don't think we have any unique challenges in India. Exploration
10:15 is challenging wherever you do it in the world. I think the Indian government has listened
10:19 to the industry, is making a good portfolio of blocks, you can nominate blocks that you
10:25 are interested in. So I think it is a very progressive licensing system that India has
10:31 moved to on the exploration front.
10:33 On the outlook front, how do you see the outlook for the industry?
10:37 I think it is excellent because I mean I have come to India, I am relatively new but it
10:42 is a very exciting place to be because it still is relatively under explored. There
10:46 is a lot of basins with only a small number of wells, there is a lot of running room still
10:52 in the basins which are proven. So the KG basin on the east coast remains one of the
10:56 world's great basins and it is only partly being developed. So we talk about creaming
11:04 curves, we are still well down the creaming curves on a lot of basins. Same with the Kutch
11:09 basin on the west coast. A number of wells drilled, a lot of discoveries, no developments
11:14 to date, relatively simple locations to develop, a little bit remote from the infrastructure
11:22 but the infrastructure will come. So I think it has got great potential and obviously India
11:27 needs hydrocarbon resources and will need them for many years to come. Obviously we
11:32 are committed as an oil and gas company to do that work, supporting India become self-sufficient
11:39 or more self-sufficient but also in a manner that takes cognisance of the environmental
11:45 concerns of the world. So we have to work to make sure that we are not polluting the
11:50 environment and we have to really focus I think on gas. India needs oil but it needs
11:56 gas more than it needs oil. I think the world needs more gas and I think you will see Cairn
12:02 over the next few years becoming less of an oil company and much more of a gas with oil
12:07 company in our journey. Thank you very much both the gentlemen for talking to NDTV profit.
12:14 It was a pleasure talking to you.
12:15 Thank you.
12:15 Thank you.
12:16 (dramatic music)
12:19 [music]