I am pleased to share that despite testing times Cairn India delivered excellentoperational results.
Global oil and gas industry is navigating a tough phase not seen in recent times. CairnIndia saw this as a unique opportunity to further strengthen its business optimize coststructure and capital spending. We adapted to the changing external environment to lay thefoundation for a solid future thereby reinforcing our ability to deliver profitable andlong-term growth.
The global recovery has further weakened with significant apprehensions on growthprospects. Amidst the current global uncertainties however India's growth story haslargely remained intact. It has shown remarkable resilience and remains progressive. Perthe IMF's latest World Economic Outlook (WEO) India remains a bright spot with stronggrowth and rising real incomes.
Low oil and gas prices made fiscal year 2015-16 one of the most demanding years forCairn India and the entire sector.
Even as these historic low prices are adversely impacting oil producing nations theycan likely give a growth boost to large crude oil importing countries like India. From US$113 billion in 2014-15 India's crude oil import bill has reduced by 43% to US$ 64 billionin 2015-16. Reduction in the import bill has moderated India's trade and current accountdeficits reduced inflation and helped contain the subsidy bill. This has supported thegovernment's efforts to implement numerous developmental projects.
However we as a nation should continue in our pursuit of higher domestic production ofhydrocarbons; for all the future projections portend a steady increase in our dependenceon foreign oil.
It is against this backdrop that one should assess your Company's role in meetingIndia's oil needs. Through the year Cairn India's operations reduced India's import billby over US$ 3 billion (more than ` 21000 crore) and contributed over US$ 1.6 billion(more than ` 10000 crore) to the government exchequer.
Given this larger context it is encouraging to see the government implementingnumerous policy reforms which will likely spur investments and reinvigorate the Indian oil& gas sector. During the year your Company successfully delivered key projects whichwill support medium and long term production.
One of the world's largest polymer flood projects at Mangala continued to yieldpositive results. Mangala enhanced oil recovery (EOR) contributed an average of 14000barrels of oil equivalent per day during FY2016. Excellent performance by Mangala EOR andencouraging upside from Aishwariya infill programme augurs well for the Rajasthan block. Iam happy to share that Mangala EOR performance reaffirms potential of the Rajasthan block.
During the year your Company commissioned the Salaya Bhogat Pipeline (SBPL) storageterminal & marine export facilities at Bhogat. This is a significant first steptowards accessing larger market for Crude oil from the Rajasthan block.
A continual enhancement in productivity has been one of the key factors for theresilience of U.S. production amidst historic low oil prices. I am happy to share thatCairn India in line with global companies has also achieved notable improvements inproductivity which will aid future growth. For example the expected ultimate recoveryfrom the Raageshwari Deep Gas field has been upgraded by over 25% as a result ofsuccessful application of hydro frac technology and better reservoir characterisation. Inthe process Cairn India also successfully placed the largest frac in India.
Leveraging gas potential of the
Rajasthan block is pivotal. We envisage quadrupling gas production which will supportresource maximization from the block.
Cairn India's success over the years has been underpinned by adoption and innovativeapplication of technology. Together with enhanced focus on productivity Cairn India iswell placed to maximize its potential.
Despite a steep drop in crude oil prices Cairn India adhered to its stated dividendpolicy. The dividend pay-out amounts to 31.6% of Cairn India's annual consolidatednormalized net profit. Our relentless focus on improving efficiencies and minimisingoperating costs enabled free cash flow generation of over US$ 350 million which hasresulted in a robust cash balance.
Cairn India's continuous drive to operate safely and responsibly sets us apart. Thisrelentless focus has helped build an excellent HSES record over the years. We ensure asafe working environment by upholding the highest international standards.
Our focus on shared prosperity through empowerment and development enables us to forgea lasting relationship with the communities. We continued our contribution to the socialand economic progress in the areas where we operate through strategic investments whichare aligned with country's social goals thereby impacting more than 800000 people.
We continue to work closely with the Government of India and value their unrelentingsupport and collaborative approach for the growth and development of oil and gas sector inIndia.
I greatly value the support of the Government of India the Government of Rajasthanother State Governments and local communities with whom we share a deep and enduringrelationship.
I would also like to thank the state and private companies who are our strategicpartners source of strength and crucial to our success.
On behalf of the entire Board I deeply appreciate all our employees for theirresilience and continued support. I also take this opportunity to thank my Boardcolleagues for their valuable guidance and active support to Cairn India's success.Finally I would like to thank our shareholders for their enduring support.
Your Company continues to work towards completion of merger with Vedanta. The mergerwould generate value for the shareholders and de-risks Cairn India.
Over the years time and again Cairn India has delivered through its targetedinvestments consistent focus on efficiency execution and reliability. Thus goingforward despite one of the toughest operating conditions and uncertain economicenvironment Cairn India is in a strong position to deliver on key projects. We willcontinue to invest in our existing assets to increase production and maximize economicrecovery.
I remain confident that Cairn India will play a pivotal role in India's quest forenergy security. Given the government's steadfast focus on higher domestic productionCairn India is well placed to expeditiously ramp up production. Our longstanding trackrecord in execution applying leading technology together with strong balance sheet wouldbe key enablers for growth. Thus Cairn India is uniquely placed to deliver enduringsustainable shareholder value.