Cairn Oil opts for cluster approach, outsourcing model for new fields

Come August, Barmer oilfields will clock a decade of production. However, for the operator, Cairn Oil & Gas — a vertical of Vedanta Ltd — there are many challenges. They include not only getting every barrel out of the ground from this otherwise declining field and the procedural issues with joint venture partner ONGC, but also developing other hydrocarbon areas that Cairn has added to its kitty.

While for the existing producing fields — Barmer and Ravva — it is working on enhancing output, for developing the new fields it has adopted a cluster approach and outsourcing model. The company calls it Integrated Project Management.

With 58 blocks, including 41 blocks under Open Acreage Licensing Programme (OALP) Round I auction, five each under OALP Rounds II and III and two blocks awarded under Discovered Small Fields Round II, Cairn today is probably the biggest private sector player in the hydrocarbon space in India.

“We have invested approximately $3.2 billion towards enhancing production from our existing fields to add reserves of more than 400 million barrels. In the current fiscal year, we intend to increase our production to an average of around 200-220 kboepd (thousand barrels per day),” Ajay Kumar Dixit, CEO of Cairn Oil & Gas, told BusinessLine.

For the new blocks, the initial work plan is to invest $800 million ($550 million per initial work plan for OALP I and an additional $245 million projected for the OALP II and III blocks) and then increase it in the case of discovery, he added.

The company recently shortlisted Lloyd’s Register to comprehensively project-manage the first 41 OALP I blocks. Cairn has already received Petroleum Exploration Licences for 11 of the first 41 OALP I blocks, and the rest are underway, he said adding that these partnerships and professional project management are necessary to be able to simultaneously explore the allotted blocks.

“Right now we are only outsourcing the clusters by appointing project managers to bring it to the field development plan (FDP) level,” Dixit said. FDP is the second stage in the exploration activity.

“We may open out one or two clusters at a later date by farming out, but whether it will be equity or service contract alone will be decided then,” he added. Farm out is an agreement where the owner of the area brings in another partner by giving a percentage of ownership in exchange of providing services.

On the differences which his company has been having with the government on the Barmer oil price, Dixit said, “We are requesting the government if they do not give us permission to export, to at least create oil and gas exchange. It will be not only for Cairn but for all people who work in the sector.”

Being an upstream player, the company will prefer easing of business environment. Pitching for clarity in the royalty and tax regime for the already producing areas contracts, he said, the need to iron out bottlenecks is a must.

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