Cairn Oil And Gas Expects Completion Of Exploration Work Before 2022
Cairn Oil and Gas, part of billionaire Anil Agarwal-led Vedanta Ltd., expects the exploration work on the 41 blocs that were awarded to the company in the first round of oilfield auctions to be completed before 2022, according to its Chief Executive Officer Sudhir Mathur.
The company will also be bidding in the third round of oil block auctions in order to achieve Vedanta Chiarman Anil Aggarwal’s vision of 50 percent of domestic oil production from the company, Mathur told BloombergQuint.
Here are edited excerpts:
Too many things in the kitty as far as Open Acreage Licensing Policy is there, you had bid for Discovered Small Field round also, what is your strategy going forward?
Our vision is to get 50 percent of India’s production and hopefully more. We are taking all these steps towards that vision. We’ve got a very large capital investment program of $3.5 billion that is underway. We didn’t really have an exploration portfolio, a meaningful one, and the government policy helped us a lot. We built our exploration portfolio. We are now working towards finding vendor partners who will help us in bringing the first oil quickly and we are hoping to have reasonable contracts out in a couple of months.
When do you expect the first production from OALP?
We are trying to do that in 18-24 months. It’s difficult to say when the first production will be from all 41 blocs. There will be some onshore and some offshore. We should be able to get first oil quickly from the blocs where we already are—like in Rajasthan, around Cambay and KG. We should be able to bring the first oil before 2022.
We will give priority to those where we can bring first oil. Second in that order would be the size and scale you would expect to find. It’s a combination of both.
You have bid for DSF. What will be the prospect of this bloc and what investment will you bring?
They are not big major movers but it helps us understand India’s geology a lot better to train our people and bring oil to the country. It supports our Chairman’s vision that India is core to Vedanta’s future.
Are you looking for funding from abroad?
We are looking for a vendor partner for technology and services. We had one round with global companies. We met them in October in India and then we had a big meeting with them in Houston in late November. After that, we had sent out a skeletal Request For Proposal and we are expecting a response. We have a strong balance sheet so there is no need to look for a private equity partner. There is no urgency to raise any cash, we have good cash flows. But as we go along, if we need capital, we will certainly raise it off Vedanta’s balance sheet.
Government has recently announced OALP III. Will you be bidding in the third round?
Yes, we are looking at the data and we will certainly bid. It makes sense to bid for blocs which are around the areas where we already have blocs and facilities.
Government received a lacklustre response in OALP 1. Foreign companies did not bid at all. What is your view?
It’s difficult to put myself in their shoes but I think they find policy consistency a bit of an issue in India as things keep changing. They need much greater freedom. For example, we have always requested the government to allow us to export oil. I don’t think that the country that imports 85 percent will ever get oil exported. However, not having the right to do that will affect other companies because they are used to that right anywhere in the world.
Government has given an extension for Cairn’s contract of Rajasthan bloc, an extension of 10 years but you have to share the profit with the government. What’s your view on this?
I think there are two issues. We believe that contract should not be extended without any change, like they have done in Enhanced Oil Recovery policy to reduce cess by 50 percent because oil is very expensive to extract in later half of the field. Increasing profit petroleum share is not a good thing. We had challenged this and the matter is in court now.
What are your production plans for Barmer bloc?
We are investing $3 billion so you should see a ramp up from April in overall production. We have targeted 200,000 barrels per day production.