The merger of Cairn India with Vedanta draws down the curtains on an iconic brand and a company that wrote a unique chapter in the country’s oil exploration business.
Cairn India, an offspring of Scottish explorer Cairn Energy, is India’s largest private oil company accounting for 27 per cent of its oil output. But that’s not the only reason why the company deserves an epitaph.
To Cairn shall go the credit of making the biggest find in India in two decades when it discovered oil in Rajasthan in 2004. Interestingly, this particular block — RJ-ON-90/1 — was given up by Shell, the original assignee, as useless. Cairn Energy acquired 27.5 per cent stake in the block from Shell in 1998 and seeing promise within a year, it consolidated its interest to 50 per cent and also became the operator of the block.
As it conducted more tests, Cairn realised the potential in the block and bought Shell out fully in 2002.
Two years later, the company was ready to announce to the world the biggest oil find anywhere that year. The Mangala, Bhagyam and Aishwarya (MBA) fields were born.
Pipeline challengeThough the discovery was a significant one, there was a challenge that needed to be surmounted before the oil could contribute to the nation’s growth.
The oil from the Rajasthan fields was heavy and thick with a waxy residue and it would solidify at low temperatures.
This meant that conventional methods of piping the oil to the market would not work. A heated pipeline that kept the temperature at over 65 degrees Centigrade was necessary to flow the oil to the refineries.
Cairn designed such a pipeline that connected its Mangala oil field to Bhogat in Gujarat — a distance of 670 km — and built it on its own.
The company had to put up heating stations for every 20 km of the pipeline — 35 in all — to maintain the heat of the insulated pipeline, which is now the longest such pipeline in the world. When it was dedicated to the nation in August 2009, the MBA fields were projected to produce 1,25,000 barrels of oil per day (bopd).
Today, the fields produce 2,11,671 bopd and are well on course to touch the 2,25,000-bopd mark soon.
True to its DNA of being an explorer and not producer, Cairn Energy sold its Indian subsidiary to mining and metals giant Vedanta in 2011.
Speculation began soon after about a merger of Cairn India with Vedanta.
Given Cairn’s mouth-watering cash reserves (₹16,867 crore as of March 2015) and with its oil wells in Rajasthan spewing out more cash, the temptation was obviously irresistible for cash-strapped Vedanta to subsume Cairn with itself.
And with the merger ends an interesting chapter in India’s oil exploration business.