Cairn to double annual capital expenditure to $1 billion for 5 years

The oil and gas major plans to kick-start 12 projects in the country in FY25

Cairn Oil & Gas will spend about $1 billion in capital expenditure (capex) annually for the next five years as it ramps up exploration activities across 12 key project areas.

This will be double the $500 million worth of capex incurred annually by the company in the past couple of years, company officials told Business Standard during an interaction at the recently concluded India Energy Week.

The announcement comes at a time when public-sector oil and gas producer ONGC and Oil India have outlined major exploration plans beginning 2024.

“For the past three-four years, we have been spending at least $500 million annually. In the past two-three years, we were not doing too much exploration. It was more of study work, and focus was on fewer wells. Now, with so many wells, $1 billion a year is not a high number,” said Hitesh Vaid, chief financial officer at Cairn Oil & Gas.

Cairn has undertaken this level of expenditure earlier as well, he said. The company remains India’s largest private oil and gas producer with a 25 per cent share of domestic crude production.

New projects eyed

In FY25, the company will kick-start 12 projects in areas around the country to expand both reserve and production volumes, Steve Moore, Deputy, chief executive officer at Cairn Oil & Gas, said at the same interaction. This includes three promising areas in Rajasthan, the Kaameshwari Deep and Mangala Barmer Hill (MBH) oil fields and Shakti, a heavy viscous oil field.

“Some of it has uncertainties with it. But from these 12 projects, about 50,000 barrels per day is expected,” Moore said.

“We have lots of assets. We have to make the most of these,” Moore said. But the company also has lots of smaller fields, some of which are considered small only because they haven’t been fully appraised yet, he said.

Moore said the company expects the shale gas from the Kaameshwari deep field can be extracted by fracking. “If it can (be fracked), we can produce 250-300 million standard cubic feet per day for 20 years. It’s a huge area. If we apply North American technology to it, we can produce at commercial rates,” he said. While the field is a ‘game changer’, it is also more uncertain, Moore said.

Meanwhile, in the Shakti area, there are four-five fields with 40 million barrels each, 3,000-4,000 barrels of oil per day can be extracted commercially with the application of thermal technology, Moore said.

Cairn is running the largest exploration project in India with 41 simultaneously explored project blocks. As reported by Business Standard last week, Cairn will begin drilling in four of their blocks in Assam next month. It will drill 10 wells across four hydrocarbon blocks, which straddle the Assam-Arunachal and Assam-Nagaland borders.

Coast to coast

The Jaya discovery in the onshore Cambay basin in Gujarat is being rapidly monetised and is currently producing over 2,500 barrels per day, Moore said.

In 2024, the company will begin drilling in the offshore greater Ravva area off the coast of Andhra Pradesh, he said. The Ravva block is situated in the shallow offshore area of Krishna Godavari Basin in Andhra Pradesh where the company has begun producing oil from an offshore platform.

The company remains hopeful of striking major finds even in the legacy Mangala oil field. Discovered in 2004, Mangala is the largest discovered oil field in the Barmer basin of Rajasthan. Located in the RJ-ON-90-1 block in Rajasthan, it was the largest onshore find in India over two decades. Cairn will undertake Alkali-Surfactant-Polymer flooding, an enhanced oil recovery method in Mangala as well as engage in infill drilling, which increases the number of wells in an area to improve efficiency.

At Barmer, the company has enough capacity to process crude oil in Barmer, which will be leveraged to produce more. “We need more wells and more pipelines to get crude from the new fields back to the central refinery areas,” Moore said.