#Cairn Oil And Gas' Deputy CEO Steve Moore and CFO Hitesh Vaid talks about company's existing production, future outlook and challenges in the industry.
Watch them in conversation with Vikas Shrivastav.
For the latest news and updates, visit: ndtvprofit.com
Watch them in conversation with Vikas Shrivastav.
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
00:05 oil and gas company. Deputy CEO is here as well as the CFO. We are going to talk to them
00:11 about their existing production, the way they are planning to ramp up their production as
00:16 well as what are the challenges in the industry that they are facing. Welcome to NDTV Profit
00:21 Minister Steve Moore.
00:22 Thank you.
00:23 So, I just wanted to start with by asking you what are the new technological developments
00:29 or ramping up of production as far as it is concerned. What new technological developments
00:36 are happening in this field and how you are planning to raise your production?
00:40 Kain, as you know, works across exploration, development and production. So, we are focusing
00:46 on all those areas to underpin the growth. So, in the exploration, we are moving into
00:52 new areas such as the North East. We are just about to kick off a major campaign across
00:56 four blocks. We will drill nine or ten wells in the North East. We are also looking at
01:01 new exploration areas on the East Coast, close to our existing Rava assets and also in deep
01:07 water and similarly on the East Coast around the Kambe field and the DSF that develops
01:13 more field blocks that we have picked up in that area. Of course, we will also be doing
01:17 further exploration and a lot of appraisal work in Rajasthan where we have had 38 discoveries
01:23 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
01:35 discovered small field blocks, particularly the G4 block which we are actively developing
01:40 on the East Coast and the Ambe block on the West Coast. We are also bringing into operation
01:47 some of the fields that have been discovered over the last ten years. Durga, which was
01:53 a discovery from two years ago in the OALP rounds in Rajasthan, was commercialised yesterday.
01:58 We just brought it on stream and we have got a plan to go to a 2004 discovery called Shakti,
02:04 which is a heavy oil field that needs thermal techniques this year as well. On the technology
02:11 side, we continue to apply the technologies that I think Cairn is famed for, which is
02:16 the polymer flood that we have started in Mangala that we are expanding to all the fields
02:20 and then we are building on that to add to the polymer mix a surfactant. Surfactant is
02:26 effectively something that washes the reservoir and can get you very high recovery factors.
02:32 The other technology that we are working to implement that hasn't been implemented so
02:37 far in Rajasthan is taking carbon dioxide and putting that back into the reservoir and
02:42 flooding the reservoirs with CO2. That gives also very high recoveries but a lower cost
02:49 but it can only be used in our deeper fields. But it also is an opportunity to take the
02:54 CO2 that we are currently venting, which is obviously not good for the environment, harness
02:58 it and it is a key part of our path to net zero, which we are trying to achieve by the
03:04 end of the decade. You also wanted to reach India's almost 50% of total production capacity.
03:12 You are at around 500 million barrels per day kind of thing because some two years back
03:17 that was the plan. So what is the status on that and how soon can we expect that to happen?
03:24 It's obviously a hard process to ramp up production. So I think for our existing discoveries we
03:32 will make a big step in that direction and we will start to see production growing but
03:37 that will be backed up by the exploration successes that we are expecting in the northeast.
03:43 So I think we need to put a timeline together. If we are looking at getting to 200,000 barrels
03:49 a day, we are looking at the 3-5 year horizon. Beyond that, I think that needs either a breakthrough
03:55 in our deep gas potential. We have huge deep gas potential in Rajasthan. We are going to
04:00 drill a well this year. If that is successful, that will trigger a further ramp up and also
04:06 if we can bring online rapidly some of the discoveries we expect to make in the northeast,
04:11 that will be another stepping stone up to a target of 250 or 300,000 as we obviously
04:17 aspire to achieve eventually.
04:20 We also have the CFO with us, Mr. Nirav Vaid. So just wanted to know since all these activities
04:27 that have been planned up right now, this would require massive investments also. So
04:32 what is the kind of investments that you are looking at over the next 3-5 years and how
04:37 you are applying to fund it?
04:39 For us, our vision as Steve said is to contribute to 50% of India's production. One of the reasons
04:46 is we want India to be at least 50% self-sufficient in its energy requirements. I think what we
04:52 have done in the last 3-4 years is build a portfolio. From 3 producing blocks, now we
04:57 have 62 blocks spread across the country, both onshore and offshore. Our acreage is
05:02 in excess of 60,000 square kilometers. So one part of the job we have already done is
05:06 building the portfolio. Second is bringing the right set of people. So last one and a
05:11 half years, we have brought people from across the world, having the specific skill sets.
05:17 And the third part now is for us to start executing those projects. We have taken the
05:22 last few months, we have gone back to the drawing board, trying to work out the plans.
05:27 And as Steve said, our focus now is in exploration, in development and as well as in field wells
05:34 for our producing fields, right across whether it is in the Northeast, whether it is in Cambe,
05:39 whether it is in Rajasthan or our offshore blocks. Now the most important part is on
05:45 the amount of capex investment. This we know will require substantial effort. We intend
05:50 to spend around $4 billion over the next 3-4 years. And this is the number which we have
05:55 spent in the past when we were building the Rajasthan facility as well as bringing that
06:01 into production. That was our first step to reach to 25%. And that time, annually we used
06:06 to spend in excess of a billion dollars and we achieved that target. Now this is the second
06:11 part of our journey where we are trying to replicate the same thing. The only advantage
06:15 as I said, now we have a big portfolio, 62 blocks, a large amount of activity and the
06:22 onus now is on the management team to start executing those projects.
06:27 So as far as shale development is concerned, you all wanted to increase your shale production
06:32 also. So given that crude is very volatile, almost around 75% at times 80-82%, so at this
06:40 level do you think that you all can take shale activity? I will just come to you also, Nick.
06:45 So what is the status right now on that?
06:48 I think obviously shale is a big opportunity, not only for us but for India. And we have
06:53 seen what has happened in US. The advantage Caine has is as far as processing facility
07:00 is concerned, whether for oil and gas, we have abundance in Rajasthan. We have built
07:04 a large scale facility. So the advantage which we have is we don't have to build these facilities
07:08 either to process or to transport. And that's why what we are focusing on is drilling wells,
07:14 ensuring that whatever we have as shale resources, to look at the quantum and how do we put them
07:20 into production. And that will require a lot of, it's not more about cost, it's more about
07:26 technology. So how we are able to implement those technologies, we did some work last
07:30 year and this year in the next six months we are trying to do a couple of more wells
07:35 and that will give us a flip to what more we need to do to make it commercial. So I
07:39 think pricing $80, I think it will work for us.
07:42 What is the current production, what is the total number of wells that you all have drilled
07:46 as of now and how many more will be drilled?
07:49 See we have, I mean over the last, our total well count is in excess of 800-900 wells across
07:55 Rajasthan in our offshore asset. What we intend to do every year is try to drill at least
08:01 75-80 wells. So that's the plan. And compared to past, obviously this is increasing and
08:07 this is required because we intend to now grow our production. And as I said, we now
08:10 have the portfolio to drill so many more wells.
08:12 So out of $4 billion that you said, how much will go towards shale and new discoveries?
08:18 See in the initial phase, it will be say, for shale it will be say around $100 million
08:22 because that's the initial phase. But more importantly the investment will be on exploration
08:27 as well as developing those explorations and a part of it in doing more wells in our existing
08:31 facility. And if shale is successful, this capex will ramp up. It will be further more.
08:37 In our current production plan, we are not counting shale as of now.
08:41 So when we quoted numbers, we're not really factoring in the shale because we haven't
08:45 demonstrated its commerciality. If it does come off, as we hope it will, then we may
08:51 have to drill 200-300 wells. So that's $5-6 million a well. So it's a huge investment.
08:58 But it's a big increase in the production as well because as Hitesh said, we have the
09:03 facilities there and we will be able to make use of those facilities and further expand
09:08 the facilities.
09:09 What is the kind of reserve that you'll have seen for shale in your fields?
09:14 Well again, it's early days to quantify it. But if we take the area and we take the thickness
09:20 where we think the shale exists and we look at analogues from North America, then we have
09:26 three basins. Each of those basins could contain two or three trillion cubic feet of gas that
09:33 could be developed. But as I say, early days. Early days we have to go and drill some more
09:38 wells across the basins and understand the amount of organic matter in the shale and
09:45 whether we can really frack it. Now obviously we've got a lot of expertise of fracking because
09:49 we're fracking all over the other reservoirs. We're taking technologies we've already brought
09:53 into India. We're applying them just slightly deeper than our MBH, ABH developments that
10:00 are already ongoing.
10:02 And given that government has come out with several OLP rounds, so what is the kind of
10:08 challenge that you see for players like you, upstream players like you in the industry?
10:13 And also what's the kind of outlook you portray for companies like you?
10:17 I mean from the exploration side, I don't think we have any unique challenges in India.
10:24 Exploration is challenging wherever you do it in the world. I think the Indian government
10:28 has listened to the industry, is making a good portfolio of blocks. You can nominate
10:34 blocks that you're interested in. So I think it's a very progressive licensing system that
10:39 India has moved to on the exploration front.
10:43 On the outlook front, how do you see the outlook for the industry?
10:46 I think it's excellent because I've come to India, I'm relatively new, but it's a very
10:51 exciting place to be because it still is relatively under-explored. There's a lot of basins with
10:57 only a small number of wells. There's a lot of running rooms still in the basins which
11:02 are proven. So the KG basin on the east coast remains one of the world's great basins and
11:09 it's only partly been developed. So we talk about creaming curves, we're still well down
11:15 the creaming curves on a lot of basins. Same with the Kutch basin on the west coast. Number
11:21 of wells drilled, a lot of discoveries, no developments to date. Relatively simple locations
11:27 to develop. A little bit remote from the infrastructure, but the infrastructure will come. So I think
11:33 it's got great potential and obviously India needs hydrocarbon resources and will need
11:38 them for many years to come. Obviously we're committed as an oil and gas company to do
11:44 that work, supporting India become self-sufficient or more self-sufficient, but also in a manner
11:52 that takes cognizance of the environmental concerns of the world. So we have to work
11:57 to make sure that we are not polluting the environment and we have to really focus I
12:02 think on gas. India needs oil, but it needs gas more than it needs oil. I think the world
12:08 needs more gas. I think you'll see Cairn over the next few years becoming less of an oil
12:14 company and much more of a gas with oil company in our journey.
12:19 Thank you very much both the gentlemen for talking to NDTV Profit. It was a pleasure
12:23 talking to you.
12:24 Thank you.
12:24 Thank you.
12:25 Thank you.
12:25 (dramatic music)
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