|
In spite of all the restrictions and complexities in oil and gas exploration in India, few western E&P companies has been cordially welcomed by them, who built up their assets there and working for the better development in world hydrocarbon province. Cairn is one of them.
The international oil industry interest in the potential of F&P is evidenced most plainly by the gathering at the gates for India’s last two New Exploration Licensing Policy (NELP) rounds. BP, Petrobras and Eni headed the list of high profile Western bidders in 2005’s round five, and BG, Petronas and Total were among those having put in for the latest acreage offer, NELP VI, by the time bids closed in mid September.
It hasn’t always been this way though, as Mike Watts, exploration director at UK independent Cairn Energy, which has been active in the region since 1996 and bid for 12 blocks this year, will attest.
When, in the early 1990s, Watts as managing director of Amsterdam listed Holland Sea Search (a company later acquired along with major shareholder Command Petroleum by Cairn) was first charged with scoping out oil and gas prospects in south Asia, he enlisted analyst group Wood Mackenzie to carry out a historical comparative study of wells drilled in Asia by international oil majors between 1888-1990. The numbers that came back were, he says, ‘a shocker’. In south Asian there had been more than 8000 spuds over this period; in India, 12.
Watts states that India, to risk understatement, is an under explored part of the world. ‘The companies that had been filling the gap in drilling were state owned enlisted ONGC, for instance had been successful by most measures. As in any oil and gas province, however, a more diverse operator ecosystem is bound to produce a more diverse range of approaches to developing a region’s in place hydrocarbon resource’ he added.
The Ravva field was to be Cairn’s opening gambit off India. Discovered in the late 1980’s by ONGC in the Bay of Bengal but not fully understood’ at the time Ravva was put in the shop window in a ‘small fields’ round that was held as part of early moves to liberalize Indian oil and gas industry First thought to hold around 70-90 million barrels. Cairn ‘with some judgment and some luck drilled down flank water injection wells that turned out to be fully oil bearing and aided by new 3D seismic, transformed the development by leaps and bounds’ into a 300 million barrel field.
And if it was something of a gambler’s throw by the then new entrant, lady luck must have been smiling. For the independent has nurtured the field over the last decade through a series of recovery enhancing drilling campaigns from a 35,000b/b oil producer to one flowing steadily at a 50,000b/b plateau.
Watts is pragmatic about the original perceived prospectivity of Ravva Something about the existing interpretation of the reservoirs at Ravva in 1993 didn’t make sense: it needed unraveling,’ he recounts. ‘What was clear was that the quality of the reservoir rocks buried beech sands was superb and it had an active kitchen. From the early days it was plain that this field had a geological imprint that the interpretations of the day didn’t show.’
The latest increase oil recovery campaign on Ravva, a complex multi-compartment field with stacked Miocene reservoirs of both oil and gas in water depths of 10-40m off the eastern Indian state of Andra Pradesh, should see current production rates maintained through to the end of next year with the help of six infill wells now being drilled by Hercules Offshore’s mat-supported jack-up Rig 31.
Ravva is a great field with a great reservoir and one that has continually performed better than our engineers have predicted, says Watts of the development that became a cornerstone’ to Cairn’s activities in the region. ‘We were anticipating coming off plateau in the not too distant future but we are still on 50,000b/b today and there is a chance that we might still raise production.’
Reserves at Ravva break out into some 255 million barrels of oil with the remainder associated gas. With Cairn looking for an upwards revision of these figures once Rig 31 wraps up drilling in nine months time watts reckons Ravva remains ‘one to watch’ given the performance to date of its wells. Outwith the infill drilling, there are also plans to spud one ‘firm’ exploration well on the field with Cairn keeping its mind open about another 12 prospects that, in Watts’ view, ‘could well be worth investigating at some point in time’.
Even when output from Ravva eventually comes off plateau, the field will have far from outlived its usefulness. Located on the Bay of Bengal shelf, Ravva linked as it is to its eponymous three separator onshore processing facility via a quarter of transport pipelines has long been in the frame as a hub for future developments further offshore. We have numerous prospects and discoveries in the deepwater immediately adjacent to Ravva,’ explains Watts, ‘so as production starts to decline, the field facilities could well enjoy a kind of resuscitation with new developments being tied in though, of course, that is for another day.’
That day may be fast approaching. Though it farmed out of a dominant position’ on deepwater acreage in the Krishna-Godavari basin neighboring Ravva to ONCG in 2000 to stump up cash for a ‘drill till you drop’ programme onshore, Cairn has retained operatorship of a high impact ultra deepwater prospect on the same block KG-DWN-98-2-that is currently being drilled by the Bedford Dolphin in 2800m of water.
‘This is a very large structure. What it will prove remains to be seen as we are so far removed from the kitchen,’ states Watts. ‘It is a true wildcat but could be a game changer for us in the KG basin.’ First results from the spud were expected to feed back in November.
More widely, the Edinburgh based independent has kept its hand in KG 98 via a 10% stake in the block, where the ‘D’ gas discovery a significant gas find made in 600m of water in August 2005 next to Cairn’s 2001 N-1 discovery has been followed by ‘A’ and ‘U’ finds, and attention is now focused on the ‘W’ exploration well. The KG deepwater finds, reckoned to represent reserves of as much as 300 million boe all in, could be ripe for development as a satellite cluster.
‘We haven’t hit the home run on this block yet,’ he acknowledges, ‘but over time it remains feasible that any of these finds could conceivably be tied in to Ravva, so their economics could be affected by Ravva and vice versa.’
Rajasthan rewards
There is some irony in the fact that Cairn’s future offshore India particularly in the high cost deep and ultra-deep water exploration plays is dependent, at least in part, on its success deep onshore in the Thar desert in the northwest state of Rajasthan, where the company has its shoulder to the wheel developing its high profile Mangala, Bhagyam, Aishwariya, Saraswati and Raageshwari discoveries.
So prolific is the 1858km2 permit in Rajasthan that of the 68 exploration wells spudded by the company, 55 have encountered oil or gas. Reserves on block RJ-ON090/1 are put at 3.6 billion boe are under active development planning and 1.4 billion boe being reviewed. First oil from the southern fields Saraswati and Raageshwari is imminent, with start up of the 1.2 billion boe Mangala field now scheduled for 2009.
Beyond Rajasthan’s importance to Cairn for its own sake as a site of a cluster of large scale oil and gas developments, combined production from the regions fields will necessarily give a welcome financial shot in the arm to its longer term ambitions in the Indian subcontinent.
‘We made the decision to farm out of our deepwater interests to ONGC at a time when our balance sheet was such that we could not take those projects forward 100%,’ offers Watts. ‘Now with our success onshore in Rajasthan and the accompanying cashflows that will start flowing in 2009/10, deepwater looks like becoming something that we can relish again.’ To drive ahead development plans in Rajasthan, Cairn this July inked a $1 billion hybrid revolving credit facility with a group of 14 international banks.
Gushers that the Rajasthan fields are and Watts points out that the are likely to put substantial sums in Cairn’s coffers they will of course not he alone in affording the independent the financial depth it needs to enlarge its interests in the region as its various offshore fields continue to faithfully serve its evolving aspirations.
Toward the end of the year, Cairn plans a big push’ in the Bay of Bengal off Bangladesh, with the Seadrill 6 jack up coming in from and assignment with SEIC off Sakhalin Island to drill three or four wells, including an appraisal of a well drilled close to the Cairn operated Sangu development, dubbed Sangu South. There are also plans for a pair of infill wells on Sangu, which stands in 15m of water, and to wind out the year, a big bang for your buck exploration spud on the nearby Hatia prospect.
Hopes are running high that Hatia, located in 5m of water 10km away from the structurally complex Sangu field, may on an unrisked basis, hold as much as 600-700 billion ft3 of gas. Both Hatia and Sangu South, if proved up, would become prime candidates for tieback to Sangu.
On block CB/0S-2 in the Cambay Basin off the western Indian state of Gujarat, meanwhile, Cairn’s producing Lakshmi and Gauri gas development together representing a 400 billion ft3 resource, continue to flow at a bread and butter rate of 6000b/b, while a neighboring gas discovery, Ambe, has been declared commercial and will be tied back as a satellite in the near future More exciting here, however, notes Watts, is ‘what lies beneath’ this gas.
‘We have found oil structures under all three of these fields, but the gas effect is such that it is difficult to map the oil bearing strata with confidence,’ he explains. Last December, using the suck it and see approach’, Cairn drilled and brought on stream an oil well on Gauri and streamed the production via the existing gas pipeline to the onshore Suvali processing plant where oil separating facilities had been installed in advance of first flow.
“primarily to the absence of several big name 10Cs from the list of bidders for NELP VI, India’s latest exploration licensing round has been perceived by certain industry observers as something of a damp squib, But Watts takes a different perspective on the country’s largest acreage offering to date, arguing that what the round revealed most of all was the many Western companies have missed the boat’ in the region The new well has flowed at 3000-4000b/d since and given it has been such a success, we are now looking at doing the same on Lakshmi,’ says Watts. ‘The Gauri well has shown that you have sustained production even if you can’t quite map the channel sands which are rather ephemeral, if you like, on the 3D seismic. So there is life yet in these fields, that much is clear.’
Self-help post-NELP
‘The latest round was very competitive, in large part because of the participation of the numerous Indian outfits involved,’ he says, ‘We ourselves see that these companies are willing to negotiate tougher fiscal terms for themselves via work programme commitments and I think they are blowing most everyone else out of the water.’
Cairn’s competitive edge in India, Watts reckons, comes down to its flexibility and inventiveness as a ‘purely exploration driven company. ‘We have seen in the past that once we establish a play it doesn’t take long before other companies pile in and the terms become exponentially tougher, so we have to be first movers to be competitive.’
Cairn’s ability to add incrementally’ to its position, he adds, is a key advantage when in the serum with oil companies looking to get a foothold into the region. The independent would also appear to be a good fit for ONGC’s recently announced strategic plan to boost production from an identified 153 marginal fields through service contracts such as was signed in September with Prize Petroleum, Hindustan Petroleum and Malaysian FPSo operator Trenergy.
Reports in Mumbai’s Business standard newspaper during October indicated that Reliance Industries was mulling the possibility of spinning off its gas assets in the Krishna Godavari basin to it was speculated- Chevron.
It is Cairn’s longstanding presence and profile in India that may favor it most moving forward, particularly now that the independent has the financial where withal, courtesy of crude production from Rajasthan to east its exploration net into the region’s deepest waters.
‘We have a great belief in this part of the world as a major hydrocarbon province and we have a long term vision for our involvement here,’ states Watts. ‘Oil is found in the mind: you have got to convince yourself before you can convince other of the potential. We see the big picture and have had good success with discoveries over the last ten years, so we have built up stamina that is only going to build up the longer we are active in India, And the various governments have seen that we deliver on our promises.’
Cairn, deepening its commitment in the region, has put the wheels in motion on a partial IPO on the Bombay Stock Exchange by year-end. ‘This will be in line with the natural evolution of the organization,’ Watts concludes, ‘and it will put power in the hands of decision makers on the ground in India who can look not only at the Greenfield potential but also farm ins and asset opportunities that may make sense in certain circumstances.
‘Cairn is evolving we are growing up in India. We set out to achieve organic growth with the drillbit and we have. So we have matured and now are creating an organization structure that will be able to make its own decisions as a platform for future growth,’ he adds, ‘which should let us get on with the business of exploration for new reserves, offshore and on.
Ensuring this growing up activities in India was challenging anyway. The fact is, opportunities make their own way to rise on, And Cairn’s entrance into India a decade ago, was just the beginning to create the hope of progress. And it is a very good sign that Cairn, as a Western E&P company, deliver on their promises and spread on all over the Indian subcontinent. |