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Cairn Oil & Gas to invest $5 billion over next 2-3 years


Cairn Oil and Gas, a unit of Vedanta Ltd, plans to invest as much as $5 billion over the next 2-3 years as it seeks to expand oil production to almost 500,000 barrels a day, chief executive Prachur Sah said.

“Cairn’s ambition remains that we want to meet 50% of India’s oil and gas production, which means we want to go to almost 500,000 barrels a day, both from our existing assets and from the new blocks that we acquired. And the plan to do that is through investment in enhanced recovery and additional exploration activities,” Sah said in an interview. “For us to meet production targets, we should be looking at investing anywhere between $4-5 billion over the next two to three years.”

The oil and gas explorer is also looking to start shale production from its Barmer field in Rajasthan shortly to reach the half-a-million-barrel production target. Cairn’s current hydrocarbon production is 170,000 barrels of oil equivalent per day.

“Shale, to be honest, is a potential game-changer for the country and the industry in general. Also, if you look at Cairn, compared to others in India, our operating costs, we have managed to keep in the top quartile globally. And in shale, how you manage operating costs is one of the key differentiators. So we believe based on our experience we can manage costs at $40-45 a barrel for shale compared to the $50-55 or $60 that we see outside,” said Sah.

“Cairn aims to produce 50% of the country’s total oil and gas requirements but declining hydrocarbons production from its fields is a challenge. Its tie-ups with oil field services majors Halliburton and Baker Hughes may help address the same to an extent. But it remains to be seen how it will address net-zero emissions along with increasing fossil fuel production from its fields, especially when it is getting into shale production, which also needs massive water resources,” said a sector analyst with an advisory firm seeking anonymity.

Cairn has tied up with Halliburton and Baker Hughes to support its plans to enhance production. “So the concept of this tie-up is actually where the two companies decided to work together on certain of Cairn’s assets, to increase the reserve base, and then increase production. The whole idea is Halliburton will help us in offshore in shale, plus a few more fields that they are operating in offshore. Our current reserve is 30 million barrels, and we have a large acreage. The whole idea is how we can convert those 30 million to 300 million barrels. What Halliburton will bring to the table is technical expertise and technology to monetize this quickly. Ditto with Baker Hughes,” Sah said.

Sah said discussions are also on with a few more partners who have similar expertise in the oil and gas sector.

“It’s not just a number; there’s a lot of thought behind it, on how we can get there,” he said.

Cairn’s investment plans come at a time billionaire Anil Agarwal-led Vedanta is considering separating its aluminium, steel, and oil and gas businesses and publicly listing them as it seeks to unlock value and simplify the company’s structure. Vedanta has appointed a committee of directors to evaluate the options.

“Whatever Vedanta Ltd has announced is what we are evaluating currently. So I would refrain from making any comments as of now. However, we have five producing blocks, and we have 51 new blocks. So we have one of the most diversified and healthy portfolios. I think, from a value unlock perspective, it remains to be seen how we can utilize the resources that we have with us. And we are continuously looking at how to expedite it,” Sah said.

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