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On September 1, an English Literature student, who loves the poems of William Wordsworth, will take charge as interim CEO of Cairn India.
P. Elango, Director – Strategy and Business Services, and a member of Cairn India’s Executive Committee, has been with Cairn for over 15 years and has worked alongside his predecessor, Rahul Dhir, for the past six years.
Elango told Business Line that externally stepping into the shoes of Dhir may seem big, but internally this may not be so.
Clear that Cairn India will continue to grow through ‘drill bit’ – a term colloquially used for exploration and production companies – he said there was no plan to get into downstream business (petroleum refinery).
Though the promoter of Cairn India, Vedanta Group, has expressed its desire to get into downstream, the top management at Cairn maintains that “it will not be through Cairn”.
Rajasthan-centric
At present, Cairn India continues to be very Rajasthan-focussed, as work is on for successful scaling up of production for the Barmer fields. The company’s production from Rajasthan has reached 175,000 barrels a day and the resource base in the area provides a basin potential to produce 300,000 barrels a day. Increase in output is subject to further investments and regulatory approvals, Elango said.
The company’s average daily gross operated production in fiscal 2012 from Rajasthan, Ravva and Cambay was 172,887 barrels of oil equivalent per day and the average price realisation was $102.7/barrel of oil equivalent.
On Government policies, Elango said Cairn had been arguing for a uniform extension policy for exploration and production activities.
This would help the contractors continue with the field development plans without facing any bottlenecks.
Regarding crude sales from Rajasthan oilfields, he said given the increased output, sale agreements have been renewed with buyers – Reliance Industries, Essar Oil, and Indian Oil Corporation – for volumes in excess of 175,000 barrels of oil a day for fiscal 2013.
On permission to export crude oil once the output is enhanced, he said, “the matter is still under Government consideration”.
Meanwhile, to ensure that the current supplies are not diverted to export-oriented units, the company has put in place a condition in the contract with the buyers, which restricts such a sale.
Overseas acquisition
Sri Lanka was the first acreage acquired and recently the company also signed a farm-in agreement with PetroSA for exploration in the offshore Block 1 in the Orange Basin, West Coast of South Africa. Interestingly, Cairn got into this agreement without any premium.
Elango said what added to the company’s profile while cracking the South Africa deal was the Mangala development pipeline designed to evacuate crude oil from Rajasthan.
It is not a conventional pipeline, as the waxy quality of crude posed challenges for transporting it. This led to Cairn build the world’s longest – 670 km -- continuously heated and insulated pipeline passing through eight districts and two States – Rajasthan and Gujarat.
At present, 590 km of the pipeline is operational and the last stretch, Salaya-Bhogat, which was facing execution challenges, is expected to be completed by next year.
On the ticklish issue – Vedanta (promoter) trying to control the company through special privileges -- which is likely surface on the company’s AGM on August 22, Elango said, “Let’s see”.
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