Cairn India, which is seeking a 10-year contract extension for its onshore block (RJ-ON-90/1) in Rajasthan, is betting big on tight oil potential in the block to boost its hydrocarbon output. “Cairn India is leveraging latest technologies from North America to unlock the tight oil potential of its Rajasthan block. This has lead to average production of 5,500 bopd from tight oil reservoir in the Barmer Hill and satellite fields in the block,” a source said.
However, analysts said the lower crude oil prices coupled with higher tax regime could potentially spoil the explorer’s programme. Shares of Cairn India have lost close to 53% of their vlaue since 2015 while the benchmark Sensex is down 12% during the period. In fact, on the back of 3.2% decline on Tuesday when the global crude oil prices fell to their new 13-year low, at R110.90, the Cairn stock is trading at its lowest level since its secondary market listing.
Of the 2 billion barrels of in-place resources in Barmer Hill (an area in the Barmer block), recovery of 10-15% is expected across the various fields, starting with Mangala and Aishwariya (other fields in the block). However, the challenge is exploiting tight oil could be about $8-10/barrel expensive than taking out conventional hydrocarbon.
“During FY2015 the company successfully completed the appraisal phase of the Barmer Hill development. In this appraisal phase of the project, initial well productivity rates lie within a range of 800 barrels of oil per day (bopd) to 1,000 bopd, which is very encouraging,” said a senior official privy to the development.
Brent crude, which briefly fell below $28/barrel on Monday to levels not seen since November 2003, was trading 48 cents lower at $28.28/barrel on Wednesday.
The Vedanta group company drilled eight horizontal and four vertical wells during the phase, while three wells were brought online during the first quarter of FY16.
“Cairn India has successfully drilled horizontal in complex geologies and has completed multistage fracking of wells with encouraging results. It is amongst the first to apply micro seismic hydrofrac monitoring technology in India,” said an oil and gas industry professional, who has worked with several oil explorers in India and overseas.
The company managed to reduce well costs by nearly 15% and realised better cost efficiency for drilling and completion of well at Barmer Hill tight reservoir formation over one year.