Oil and gas producer Cairn India has been in news for having received the government’s approval for an extension of its Production Sharing Contract for its flagship Barmer block in Rajasthan. In an exclusive interview with Bilal Abdi, Acting Chief Executive Officer (CEO) Sudhir Mathur shares a perspective on what the decision means Edited excerpts..
With the government extending the Production Sharing Contract, what kind of investment fillip is expected in the Rajasthan and Cambay blocks?
We are yet to give our guidance as we have to get the investment plan cleared from the board. At a very macro level, we want to double production in the next two to three years, which requires very serious investment upwards of $1 billion initially. We would be very happy to disclose the exact plans once we get the approval from the board of directors. The idea is to maximise effort on the exploration front. We have just started exploration in Palar-Pennar basin and we will do some more exploration in Rajasthan too. In terms of projects, we will focus more on the gas project in Rajasthan, Enhanced Oil Recovery in Aishwariya and Bhagyam fields as well as extraction of tight oil from Aishwariya Barmer Hill.
Cairn India managed to cut down expenses by 18 per cent in the nine months ended December, according to its financial statements. What explains the dip?
Trying times create opportunity to reset the cost base. The management team worked very hard. We used a three-pronged strategy on the cost side — optimise the use of assets, deploying cutting edge technology as well as re-negotiation with the suppliers. We have been working closely with vendors and good technology suppliers which makes a lot of difference in real time operations. We now have access to resources and data which we did not have before. All of this increases efficiency. Because of these factors, higher is the production, lesser is the cost per barrel.
You have just begun exploration in the Palar-Pennar block. What is the estimate of reserves it holds?
The initial 3D data seems very promising. There is no estimate of reserves as yet. It is a frontier basin. So, the risk is more but we have always believed in India’s geology and after the 3D data was analyzed we decided to put the drilling machine at work.
The oil ministry is planning to incentivize EOR and announce a new policy around Performance Enhancement Contracts for extraction of oil from mature and difficult fields. How do you view these developments?
We have always been delighted to have discussions with the oil ministry. Its policies for both the downstream and upstream segments have been very progressive including LPG reforms and market pricing. All of these policies reflect a deep understanding of the industry — that technology costs money and there is a need to incentivize tertiary recovery projects. If there is oil in the ground then there is no need to put exploration money at risk and if there is capital available then why not take it to the last mile? It is the government’s way of saying we are keeping pace with technology advancements and willing to look at existing contracts, which is the right thing. Oil and gas contracts are written for 20-30 years and technology changes are very difficult to embed in policies and contracts. I think it is one of the most progressive and transformational things the government can do — embedding technology changes into an existing contract to bring about efficiency across the sector.
There were reports about gas sale disruption in Raageshwari Deep Gas Field due to disagreement between the transporter and buyer? Has the issue been resolved?
There are always issues which spring up during the course of work. The issue has been resolved and we have started supplying to all our customers.
Cairn India was looking at collaborating with global companies for service contracts for its different assets. Which assets have been identified for this? What kind of collaboration are you looking at?
We are taking to various service providers. The idea is to expedite production. If we were to execute these five projects simultaneously ourselves, it would be quite challenging for the company. Accelerating production is line with the government’s vision to increase production as much and as fast as you can. Victor Antipin Jersey