00:00 Hello, I am Vikas Shrivastava. We are with the Kain Oil and Gas, the Vedanta Group's
00:05 oil and gas company. Deputy CEO is here as well as the CFO. We are going to talk to them
00:11 about their existing production, the way they are planning to ramp up their production as
00:16 well as what are the challenges in the industry that they are facing. Welcome to NDTV Profit
00:21 Minister Steve Moore.
00:22 Thank you.
00:23 So, I just wanted to start with by asking you what are the new technological developments
00:29 or ramping up of production as far as it is concerned. What new technological developments
00:36 are happening in this field and how you are planning to raise your production?
00:40 Kain, as you know, works across exploration, development and production. So, we are focusing
00:46 on all those areas to underpin the growth. So, in the exploration, we are moving into
00:52 new areas such as the North East. We are just about to kick off a major campaign across
00:56 four blocks. We will drill nine or ten wells in the North East. We are also looking at
01:01 new exploration areas on the East Coast, close to our existing Rava assets and also in deep
01:07 water and similarly on the East Coast around the Kambe field and the DSF that develops
01:13 more field blocks that we have picked up in that area. Of course, we will also be doing
01:17 further exploration and a lot of appraisal work in Rajasthan where we have had 38 discoveries
01:23 over the last ten or so years and we are trying to fully quantify what is there. On the development
01:30 side, a lot of the development will come out of that exploration work but also from the
01:35 discovered small field blocks, particularly the G4 block which we are actively developing
01:40 on the East Coast and the Ambe block on the West Coast. We are also bringing into operation
01:47 some of the fields that have been discovered over the last ten years. Durga, which was
01:53 a discovery from two years ago in the OALP rounds in Rajasthan, was commercialised yesterday.
01:58 We just brought it on stream and we have got a plan to go to a 2004 discovery called Shakti,
02:04 which is a heavy oil field that needs thermal techniques this year as well. On the technology
02:11 side, we continue to apply the technologies that I think Cairn is famed for, which is
02:16 the polymer flood that we have started in Mangala that we are expanding to all the fields
02:20 and then we are building on that to add to the polymer mix a surfactant. Surfactant is
02:26 effectively something that washes the reservoir and can get you very high recovery factors.
02:32 The other technology that we are working to implement that hasn't been implemented so
02:37 far in Rajasthan is taking carbon dioxide and putting that back into the reservoir and
02:42 flooding the reservoirs with CO2. That gives also very high recoveries but a lower cost
02:49 but it can only be used in our deeper fields. But it also is an opportunity to take the
02:54 CO2 that we are currently venting, which is obviously not good for the environment, harness
02:58 it and it is a key part of our path to net zero, which we are trying to achieve by the
03:04 end of the decade. You also wanted to reach India's almost 50% of total production capacity.
03:12 You are at around 500 million barrels per day kind of thing because some two years back
03:17 that was the plan. So what is the status on that and how soon can we expect that to happen?
03:24 It's obviously a hard process to ramp up production. So I think for our existing discoveries we
03:32 will make a big step in that direction and we will start to see production growing but
03:37 that will be backed up by the exploration successes that we are expecting in the northeast.
03:43 So I think we need to put a timeline together. If we are looking at getting to 200,000 barrels
03:49 a day, we are looking at the 3-5 year horizon. Beyond that, I think that needs either a breakthrough
03:55 in our deep gas potential. We have huge deep gas potential in Rajasthan. We are going to
04:00 drill a well this year. If that is successful, that will trigger a further ramp up and also
04:06 if we can bring online rapidly some of the discoveries we expect to make in the northeast,
04:11 that will be another stepping stone up to a target of 250 or 300,000 as we obviously
04:17 aspire to achieve eventually.
04:20 We also have the CFO with us, Mr. Nirav Vaid. So just wanted to know since all these activities
04:27 that have been planned up right now, this would require massive investments also. So
04:32 what is the kind of investments that you are looking at over the next 3-5 years and how
04:37 you are applying to fund it?
04:39 For us, our vision as Steve said is to contribute to 50% of India's production. One of the reasons
04:46 is we want India to be at least 50% self-sufficient in its energy requirements. I think what we
04:52 have done in the last 3-4 years is build a portfolio. From 3 producing blocks, now we
04:57 have 62 blocks spread across the country, both onshore and offshore. Our acreage is
05:02 in excess of 60,000 square kilometers. So one part of the job we have already done is
05:06 building the portfolio. Second is bringing the right set of people. So last one and a
05:11 half years, we have brought people from across the world, having the specific skill sets.
05:17 And the third part now is for us to start executing those projects. We have taken the
05:22 last few months, we have gone back to the drawing board, trying to work out the plans.
05:27 And as Steve said, our focus now is in exploration, in development and as well as in field wells
05:34 for our producing fields, right across whether it is in the Northeast, whether it is in Cambe,
05:39 whether it is in Rajasthan or our offshore blocks. Now the most important part is on
05:45 the amount of capex investment. This we know will require substantial effort. We intend
05:50 to spend around $4 billion over the next 3-4 years. And this is the number which we have
05:55 spent in the past when we were building the Rajasthan facility as well as bringing that
06:01 into production. That was our first step to reach to 25%. And that time, annually we used
06:06 to spend in excess of a billion dollars and we achieved that target. Now this is the second
06:11 part of our journey where we are trying to replicate the same thing. The only advantage
06:15 as I said, now we have a big portfolio, 62 blocks, a large amount of activity and the
06:22 onus now is on the management team to start executing those projects.
06:27 So as far as shale development is concerned, you all wanted to increase your shale production
06:32 also. So given that crude is very volatile, almost around 75% at times 80-82%, so at this
06:40 level do you think that you all can take shale activity? I will just come to you also, Nick.
06:45 So what is the status right now on that?
06:48 I think obviously shale is a big opportunity, not only for us but for India. And we have
06:53 seen what has happened in US. The advantage Caine has is as far as processing facility
07:00 is concerned, whether for oil and gas, we have abundance in Rajasthan. We have built
07:04 a large scale facility. So the advantage which we have is we don't have to build these facilities
07:08 either to process or to transport. And that's why what we are focusing on is drilling wells,
07:14 ensuring that whatever we have as shale resources, to look at the quantum and how do we put them
07:20 into production. And that will require a lot of, it's not more about cost, it's more about
07:26 technology. So how we are able to implement those technologies, we did some work last
07:30 year and this year in the next six months we are trying to do a couple of more wells
07:35 and that will give us a flip to what more we need to do to make it commercial. So I
07:39 think pricing $80, I think it will work for us.
07:42 What is the current production, what is the total number of wells that you all have drilled
07:46 as of now and how many more will be drilled?
07:49 See we have, I mean over the last, our total well count is in excess of 800-900 wells across
07:55 Rajasthan in our offshore asset. What we intend to do every year is try to drill at least
08:01 75-80 wells. So that's the plan. And compared to past, obviously this is increasing and
08:07 this is required because we intend to now grow our production. And as I said, we now
08:10 have the portfolio to drill so many more wells.
08:12 So out of $4 billion that you said, how much will go towards shale and new discoveries?
08:18 See in the initial phase, it will be say, for shale it will be say around $100 million
08:22 because that's the initial phase. But more importantly the investment will be on exploration
08:27 as well as developing those explorations and a part of it in doing more wells in our existing
08:31 facility. And if shale is successful, this capex will ramp up. It will be further more.
08:37 In our current production plan, we are not counting shale as of now.
08:41 So when we quoted numbers, we're not really factoring in the shale because we haven't
08:45 demonstrated its commerciality. If it does come off, as we hope it will, then we may
08:51 have to drill 200-300 wells. So that's $5-6 million a well. So it's a huge investment.
08:58 But it's a big increase in the production as well because as Hitesh said, we have the
09:03 facilities there and we will be able to make use of those facilities and further expand
09:08 the facilities.
09:09 What is the kind of reserve that you'll have seen for shale in your fields?
09:14 Well again, it's early days to quantify it. But if we take the area and we take the thickness
09:20 where we think the shale exists and we look at analogues from North America, then we have
09:26 three basins. Each of those basins could contain two or three trillion cubic feet of gas that
09:33 could be developed. But as I say, early days. Early days we have to go and drill some more
09:38 wells across the basins and understand the amount of organic matter in the shale and
09:45 whether we can really frack it. Now obviously we've got a lot of expertise of fracking because
09:49 we're fracking all over the other reservoirs. We're taking technologies we've already brought
09:53 into India. We're applying them just slightly deeper than our MBH, ABH developments that
10:00 are already ongoing.
10:02 And given that government has come out with several OLP rounds, so what is the kind of
10:08 challenge that you see for players like you, upstream players like you in the industry?
10:13 And also what's the kind of outlook you portray for companies like you?
10:17 I mean from the exploration side, I don't think we have any unique challenges in India.
10:24 Exploration is challenging wherever you do it in the world. I think the Indian government
10:28 has listened to the industry, is making a good portfolio of blocks. You can nominate
10:34 blocks that you're interested in. So I think it's a very progressive licensing system that
10:39 India has moved to on the exploration front.
10:43 On the outlook front, how do you see the outlook for the industry?
10:46 I think it's excellent because I've come to India, I'm relatively new, but it's a very
10:51 exciting place to be because it still is relatively under-explored. There's a lot of basins with
10:57 only a small number of wells. There's a lot of running rooms still in the basins which
11:02 are proven. So the KG basin on the east coast remains one of the world's great basins and
11:09 it's only partly been developed. So we talk about creaming curves, we're still well down
11:15 the creaming curves on a lot of basins. Same with the Kutch basin on the west coast. Number
11:21 of wells drilled, a lot of discoveries, no developments to date. Relatively simple locations
11:27 to develop. A little bit remote from the infrastructure, but the infrastructure will come. So I think
11:33 it's got great potential and obviously India needs hydrocarbon resources and will need
11:38 them for many years to come. Obviously we're committed as an oil and gas company to do
11:44 that work, supporting India become self-sufficient or more self-sufficient, but also in a manner
11:52 that takes cognizance of the environmental concerns of the world. So we have to work
11:57 to make sure that we are not polluting the environment and we have to really focus I
12:02 think on gas. India needs oil, but it needs gas more than it needs oil. I think the world
12:08 needs more gas. I think you'll see Cairn over the next few years becoming less of an oil
12:14 company and much more of a gas with oil company in our journey.
12:19 Thank you very much both the gentlemen for talking to NDTV Profit. It was a pleasure
12:23 talking to you.
12:24 Thank you.
12:24 Thank you.
12:25 Thank you.
12:25 (dramatic music)
12:28 [XBOX SOUND]
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