The announcement follows Cairn’s commitment to doubling its capacity and contributing 50% to the country’s domestic crude production.
Vedanta’s Cairn Oil and Gas have entered into an agreement with global energy sector contractor Halliburton Offshore Services to increase the recoverable hydrocarbon reserve from its offshore assets, including the Ravva field off the Andhra Pradesh coast, Cambay block on the western coast, and several newly acquired blocks through bidding under the Open Acreage Licensing Policy (OALP) regime. The two companies have also agreed to begin shale exploration in the Lower Barmer Hills area of western Rajasthan. The developments come at a time when oil and gas investments are being done with a very cautious approach and explorations have been stopped in a lot of countries.
Cairn will work with Halliburton to pursue its target of increasing the recoverable reserve from its offshore assets to 300 million barrels of oil equivalent (mboe) from the current level of 30 mboe. The announcement follows Cairn’s commitment to doubling its capacity and contributing 50% to the country’s domestic crude production. Fields run under production sharing contracts by private developers such as Cairn contribute about 25% of the country’s domestic output while 65% is produced by state-run Oil and Natural Gas Corporation (ONGC), and the remaining by state-run Oil India. The country imports about 85% of its crude oil requirement and the government are eyeing ways to increase domestic output.
“Halliburton will likely start working on Cambay offshore probably by the end of this month”, Prachur Sah, CEO of the largest private-sector crude oil producer in India, told FE. The company has won 51 hydrocarbon blocks in the initial rounds of the OALP auctions. Speaking about the prospects of shale exploration, Sah said that “in the US the breakeven cost of shale is around $50-$55 (per barrel) and we are attempting to bring it to $40-$45”.
Cairn and Halliburton will develop pilot drills to explore the potential of shale in the Barmer basin. India is yet to commercially produce shale in the country. “It is a capital-intensive affair and we will work with the government to bring in the right shale policy which will make the projects viable,” Sah added. The cost of conventional crude oil production in the country is around $25-30 per barrel. The country’s state-run national oil companies have also been looking for international players to ramp up domestic oil and gas production to reduce the dependency on imports. As FE reported earlier, the government has suggested ONGC “bring a joint venture partner of international experience and farm out 60% participating interest and operatorship” of the crude producing Mumbai High field and offer similar stake to foreign players in the Bassein and Satellite asset, also located in Mumbai offshore.
The Union government, in February 2019, reformed OALP to enhance exploration activities, attract domestic and foreign investment and accelerate domestic production of oil and gas from existing fields. However, domestic production has been falling with the ageing of existing fields and muted response from the industry to take up new projects, mainly due to a lack of adequate incentives.