Cairn India Annual Report | 2011 - 12


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Cairn India Annual Report | 2011 - 12

  1. 1. BUILD I CONSOLIDATE I DELIVERAnnual Report and Financial Statements 2011-2012
  2. 2. FY2012Q1 Mangala Development Pipeline fastest growing energy company in Asia and the fourth fastest growing 04 Management Speak Internal Controls and their Adequacy Abridged Financials 44 45 Consolidated Balance Sheet Consolidated Statement of 112 113Average daily gross operated Project declared runners-up in the world at the Platts Top 250 Board of Directors 02 Business Risks 46 Profit and Lossproduction at 171,801 boe in “Project of the Year” award Energy Company Awards 2011 at Chairman’s Letter 04 Corporate Social Responsibility 48 Consolidated Cash Flow 114 organised by Project Management the International Energy Week, Managing Director and CEO’s 06 StatementRJ-ON-90/1Saraswati field commenced International Singapore Letter 52 Corporate Governance Notes to Consolidated Financial Statements 116production at the end of May 2011 Sri Lanka CLPL-Dorado-91H/1z well was the Rajasthan Operations bagged 12 awards in the “Silver Jubilee Mines 08 Management Analysis Discussion & Report on Corporate Governance 54 Glossary 147More than 11 million barrels (mm first ever exploration well drilled in Safety Week” function at Bikaner, Additional Shareholder 63bbls) of crude oil safely delivered Sri Lanka in 30 years and also the Rajasthan under the aegis of the Achievements 10 Informationthrough the pipeline first with a hydrocarbon discovery Directorate General of Mines Safety The Rajasthan Project 12 Certificate of the MD & CEO 67 (DGMS) Global Hydrocarbon Resources 18 and Dy. CFOGross cumulative Rajasthan Discovery and establishment of a Q4 Well Services and Production 20 Auditor’s Certificate 68development capital expenditure working hydrocarbon system in the Optimisation Directors’ Report 69stood at US$ 3,115 million Mannar Basin; success in the first The Mangala Processing Terminal 24KG-ONN-2003/1 well of the three well programme Q3 RJ-ON-90/1 Bhagyam field commenced The Mangala Development Pipeline Rajasthan Sales 26 28 76 Audited Financial StatementsThe JV entered Phase-II of the production on 19 January, 2012 Financial Overview 29exploration period Other Producing Assets 30 Auditors’ Report 78 The Vedanta Group now holds 59% Marginal Oil field Raageshwari Explore, Discover and 32 Balance Sheet 81Ravva of the issued share capital of the commenced production on 8 Add Value Statement of Profit and Loss 82Infill drilling campaign completed; company March, 2012 Human Resources 36 Cash Flow Statement 83infill programme met the objective Health, Safety, Environment 39 Notes to Financial Statements 85of slowing down production decline RJ-ON-90/1 Rajasthan potential resource for the and Assurance Auditor’s Report on Consolidated 111 CONTENTS Aishwariya field development block is now estimated at 7.3 bn boe Financial Statements Annual Report 2012Cumulative crude sales in excess of underway; EPC contractors engaged gross in-place from 6.5 bn boe gross50 mm bbls to Indian refiners in-place KG-ONN-2003/1Q2 Drilling of an exploration well Following positive results from the ongoing to appraise the Nagayalanka EOR polymer pilot and a decision to discovery submit a Field DevelopmentAverage daily gross operated Plan (FDP), 70 mm bbls booked asproduction at 169,944 boe Sri Lanka gross proved and probable reserves Cairn India is one of the largest independent oil and gas exploration and Completed Phase I exploration in the production companies in India. Cairn and its JV partners’ account for moreCairn India shareholders approve frontier Mannar Basin. Three well Sales arrangements renewed withthe acceptance of conditions drilling campaign resulted in two buyers for volumes in excess of than a fifth of India’s domestic crude oil production. It has been operatingimposed by the Government of successive discoveries, Cairn Lanka 175,000 bopdIndia (GoI) for the Cairn PLC and notifies the Government of Sri Lanka in India for more than fifteen years. Cairn India’s producing assets are inVedanta transaction of its intention to enter Phase 2 of Others Rajasthan, Cambay and Ravva. It has a total of 10 blocks in its portfolio the exploration period in the block The Cairn India Dividend Policy wasRJ-ON-90/1 approved by the Board of Directors. in three strategically focused areas.Completed two years of production Others The aim is to maintain dividendfrom the Mangala field The company was adjudged the payout ratio at around 20% of annual consolidated net profit
  3. 3. 2 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 3BOARD OF DIRECTORS BOARD OF DIRECTORS From left to right, seated: Mr. Navin Agarwal, Mr. Aman Mehta, Mr. Naresh Chandra From left to right, standing: Mr Rahul Dhir, Mr. Tarun Jain, Dr. Omkar Goswami,Board of Directors Ms. Priya Agarwal, Mr. Edward StoryMR. NAVIN AGARWAL August, 2006. Mr. Dhir has over 25 years Committee on Corporate Governance, MR. AMAN MEHTA School of Economics. He is a D. Phil with Ogilvy & Mather and in HumanChairman and Non-Executive Director of experience in the Oil and Gas sector India’s Ambassador to the USA, Senior Non-Executive and Independent Director in Economics from Oxford University. Resources with KornFerry International, covering technology, finance and business Advisor to the Prime Minister, Governor He has taught in several academic Vedanta Resources and HDFC Bank.Mr. Navin Agarwal, 51, is a Bachelor in leadership. Mr. Dhir started his career as of Rajasthan, Cabinet Secretary to the Mr. Aman Mehta, 65, is an economics institutions in India and abroad; editedCommerce from Sydenham College in an oil and gas reservoir engineer before Government of India, and Chief Secretary graduate from Delhi University. He has one of India’s best known business MR. TARUN JAINMumbai, India. He is the Deputy Executive moving into investment banking. He has to the Government of Rajasthan. A reputed over 35 years of experience in various magazines; was the Chief Economist of Non-Executive DirectorChairman of Vedanta Resources plc and worked at SBC Warburg, Morgan Stanley administrator and diplomat, Mr. Chandra positions with the HSBC Group. Mr. Mehta the Confederation of Indian Industry;was appointed to its Board in November and Merrill Lynch. Before joining Cairn serves as an independent director on the occupies himself primarily with corporate and is the Executive Chairman of CERG Mr. Tarun Jain, 52, is a graduate from the2004. Mr. Agarwal has played a key role India, he was the Managing Director and boards of a number of companies. governance, with Board and Advisory roles Advisory Private Limited, a consulting Institute of Cost and Works Accountantsin strategic planning for Vedanta, and Co-Head of Energy and Power Investment in a range of Companies and Institutions and advisory firm. Dr. Goswami serves of India and a fellow member of bothdrives the execution of organic growth Banking at Merrill Lynch. MR. EDWARD T STORY in India as well as overseas. Formerly, he as an independent director on the board the Institute of Chartered Accountantsand acquisitions. He also oversees Non-Executive and Independent Director has been a Supervisory Board member of a number of companies and has of India and the Institute of Companycapital raising initiatives, global investor Mr. Dhir holds a degree in Bachelor of of ING Group NV and a Director of Raffles authored various books and research Secretaries of India.relations and talent development at the Technology from the Indian Institute Mr. Edward T Story, 68, holds a Bachelor Holdings, Singapore. He is also a member papers on economic history, industrialmanagement level, and has over 25 years of Technology, Delhi; MSc. from the of Science degree from Trinity University, of the governing board of the Indian economics, public sector, bankruptcy He is the Director of Finance of Sterliteof experience. He chairs the Vedanta’s University of Texas at Austin and MBA San Antonio, Texas and holds a Masters School of Business, Hyderabad and a laws and procedures, economic policy, Industries (India) Limited. Mr. Jaingroup Executive Committee. In this role, from the Wharton Business School in degree in Business Administration from member of the International Advisory corporate finance, corporate governance, has over 27 years of experience inhe provides strategic direction and guides Pennsylvania. the University of Texas with an honorary Board of Prudential of America. He has public finance, tax enforcement and legal corporate finance, accounts, audit,the sharing and implementation of best Doctorate degree by the Institute of had a long association with INSEAD where reforms. taxation, secretarial and legal practices across the group. MR. NARESH CHANDRA Finance and Economics of Mongolia. He he was a member of their Indian Advisory He is responsible for Sterlite’s strategic Non-Executive and Independent Director is the Chairman of the North America Council. MS. PRIYA AGARWAL financial matters, including corporateMR. RAHUL DHIR Mongolia Business Council. Mr. Story Non-Executive Director finance, corporate strategy, businessManaging Director and CEO Mr. Naresh Chandra, 77, is a post has more than 40 years experience in DR. OMKAR GOSWAMI development and M&As. graduate (MSc. in Mathematics) from the international oil and gas industry Non-Executive and Independent Director Ms. Priya Agarwal, 22, has done B.Sc.Mr. Rahul Dhir, 46, joined Cairn India as Allahabad University and a retired IAS and is the founder, President and Chief Psychology with Business Managementan Additional Director and was appointed officer. Previously, Mr. Chandra was Executive Officer of the London Stock Dr. Omkar Goswami, 55, holds a Master from the University of Warwick in the the Managing Director and CEO on 22 Chairman of the Indian Government Exchange listed SOCO International PLC. of Economics Degree from the Delhi She has experience in Public Relations
  4. 4. 4 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 5MANAGEMENT SPEAK MANAGEMENT SPEAK Chairman’s Letter We are witnessing continuous global economic uncertainty. Global economy, dividend payout ratio of around 20 per cent of the annual consolidated net Government of India. Despite the current economic uncertainties, the outlook though recovering, has been put profits to our shareholders. for oil price remains good and we are Dear Shareholder, under threat by the Eurozone’s preserving our investment trajectory. financial turbulence. These prevailing We operate in an industry, where our This is my first year as Chairman. uncertainties have subdued the oil commitment to the health and safety We are proud to produce energy for India. markets with the resultant impact on of our people and sustainability of Jai Hind! I am delighted to have taken prices and volatility. We are living in a the environment and communities in over the Chairmanship of your very interdependent world. Developing which we work, are very critical. I am Company and would like to thank economies like India are especially committed to meet our world-class my predecessor, Sir Bill Gammell, vulnerable to volatility in oil prices – standards in safety and operational for his exceptional stewardship our import dependence is increasing. excellence, and I am quite confident of the Company. Cairn India is With expected growth in demand for that everyone in Cairn India joins me oil, it would be critical for the nation to in that commitment. Navin Agarwal a great company with a very secure energy supplies. Chairman well established track record. The support of the Government of The performance of Cairn India Your Company’s world class assets in India, the state governments, our Date: 20 April, 2012 is testament to the strength of Rajasthan have played a significant joint venture partner ONGC, local our people. Their unrelenting role in securing nation’s energy communities and key contractors has commitment is admirable. supplies, to the nation’s exchequer, been a key enabler. I personally thank and to the development and income all for their help. On your behalf, I Following the completion of the generation in the states of Rajasthan also wish to thank all employees of Vedanta Group’s purchase of and Gujarat. During the year, we your Company for their focus and the majority share in Cairn India reduced oil imports by US$ 6 billion. commitment on finding and producing Limited, your Company is well energy safely, reliably and efficiently. poised for its next phase FY2012 was an exciting year for of growth. your Company. Cairn India reached I remain confident that we will an important milestone: crude oil continue to meet India’s energy production from the Rajasthan block challenges and deliver enduring value touched 175,000 barrels of oil per for our shareholders. With the talent day (bopd). Similarly, your Company and commitment of the people of also commenced production from the Cairn India, we are strong, resilient, Bhagyam, Raageshwari and Saraswati and well-positioned for the future. fields in Rajasthan. Looking forward to FY2013, we remain Your Company’s international foray committed to operate our business met with successes. The discoveries in efficiently. Your Company is now in Sri Lanka were the first in 30 years. We a strong position to work towards have now entered our second phase of basin production potential of 300,000 exploration. bopd, subject to further investments and approvals from our Joint Your Company’s Board of Directors has Venture partner, the Oil and Natural approved its dividend policy. We aim a Gas Corporation (ONGC) and the
  5. 5. 6 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 7MANAGEMENT SPEAK MANAGEMENT SPEAK Managing Director The chapter on Management Discussion and Analysis gives the details of your place supports our vision of producing 300,000 barrels of oil per day (bopd) There is more to deliver. With the much needed correct alignment Company’s operations during the year. In out of Rajasthan. between your Company on the one & CEO’s Letter this letter, allow me to highlight some that have brought me great satisfaction as this • On the exploration front, we have hand, and its Rajasthan JV partner, ONGC, and the Ministry of Petroleum Company’s Managing Director and CEO. had two sets of discoveries: (i) the and Natural Gas, I am confident that Dear Shareholder, We have seen safe operations across all frontier exploration programme more will happen in the years to come. your Company’s assets — with a rigorous in the Mannar Basin in Sri Lanka Just as I am confident that the new focus on health, safety and environment opened real possibilities in an entirely majority shareholder, the Vedanta FY2012 was truly a terrific year (HSE), asset integrity and operating new geography, and (ii) our success Group, will do all that is necessary to for your Company, as the business effectiveness. I am proud to inform you in Nagyalanka has established accelerate growth, seek new assets, delivered on all fronts — operations, that all the assets had over 98 per cent hydrocarbons in the onshore part develop greater exploration potential, projects, explorations and financial plant uptime with high standards. The of the KG basin. and create an even more robust numbers – while in the midst of latter was evident in the high operational foundation for an enterprise that the considerable on-going uncertainty. uptime and low operating costs — • The business has real sustainable country can, and should, be proud of. resulting in a high EBIDTA. potential — as evidenced by our This speaks volumes about the ability to replace 175 per cent of our robustness of the organisation • Despite numerous challenges, the production. and its commitment. Bhagyam development was completed and the production started in January • We are uniquely placed to contribute 2012. Integrated production facilities to India. In FY2012, the assets Rahul Dhir were scaled up to support production operated by Cairn India contributed Managing Director and CEO in line with a unified block offtake US$ 2.4 billion to the exchequer. capability. And oil production from these assets Date: 20 April, 2012 helped reduce oil imports by over • The polymer phase of EOR enhanced US$ 6 billion. oil recovery (EOR) pilot at Mangala has been successful; and your Board • Average daily gross production of Directors has approved the field increased by 16% — from 149,103 development plan (FDP) for a full field barrels of oil equivalent per day implementation of polymer injection in (boepd) in FY2011 to 172,887 boepd Mangala. As a consequence, we have in FY2012. been able to convert 70 mm bbls from contingent to 2P reserves. This will • We have also done well financially. be one of the largest polymer flood Revenues grew by 15.4% to Rs.118,607 projects in the world — and illustrates million in FY2012. EBIDTA rose by how Cairn India is using innovative 10.7% to Rs.92,544 million. PBT technologies to enhance recovery and increased by 22% to Rs.84,235 create value for all stakeholders. million. And PAT rose by 25% to Rs.79,378 million. • In Rajasthan, extensive technical studies have highlighted over 3.1 billion I would say that Cairn India has barrels of oil equivalent (bn boe) in delivered. To the nation. And to its exploration potential. This, along with shareholders. the 4.2 bn boe of discovered oil in-
  7. 7. 10 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 11FY2012 ACHIEVEMENTS MANAGEMENT DISCUSSION AND ANALYSISFY2012 saw many Rajasthan, crude oil sales earlier estimate of 2.5 bn boeachievements in Cairn India agreements have been renewed gross in-place to 3.1 bn boe grossLimited (‘Cairn India’, ‘CIL’ with buyers for volumes in excess in-place. The Rajasthan recoverableor ‘the Company’). Some of of 175,000 bopd for FY2013. risked prospective resource is now estimated at 530 mm boe, anthese were: increase of 112%. Higher output from allCompletion of Vedanta’s operations in India. The average daily gross operated Higher production potentialpurchase of the majority production in FY2012 from in Rajasthan. The total resourceshare in Cairn India. With Rajasthan, Ravva and Cambay was base in Rajasthan now provideseffect from 8 December, 2011, 172,887 barrels of oil equivalent a basin potential to producethe Vedanta Group became the per day (boepd). The average price 300,000 bopd, subject to furtherpromoter of the Company. realisation was US$ 102.7 per boe. investments and regulatory approvals. This is equivalent toApproval of Dividend Policy. approximately 40% of India’s Higher revenue and profits. current crude oil production.The CIL Board approved a Consolidated annual revenue ofDividend Policy that aims to the Company was US$ 2.4 billionmaintain a Dividend payout — or an increase of around 10 per Second discovery in theratio of around 20% of annual cent over FY2011. Net income KG Onshore Basin. Theconsolidated net profits to its was US$ 1.6 billion, representing Company had a second successfulshareholders. a growth of 19.4 per cent over discovery at the KG basin in Andhra the previous year. The earnings Pradesh. This was Nagayalanka-Successful scaling up per share (EPS) for FY2012 was SE-1 in the KG-ONN-2003/1 block.of production from our Rs.41.71, compared to Rs.33.35 It is the largest onshore discoveryRajasthan fields. After in FY2011. in the KG basin to date — with anconsistently producing at its estimated in-place resource ofpreviously approved rate of around 550 mm boe.125,000 barrels of oil per day Successful enhanced oil(bopd) for over one and a half recovery (EOR) Pilot raises proven plus probable (2P) Successful discovery in deepyears, production from theMangala field has been ramped reserves at Rajasthan. The sea waters off Sri Lanka.up to 150,000 bopd following field scale EOR pilot project in Similarly, Cairn India’s Sri LankaGoI approval. The Bhagyam Mangala gave positive results. offshore operations had explorationfield commenced production in Consequently, Cairn India has successes. Two out of three wellsJanuary 2012. Including output booked 2P reserves of 70 mm bbls. drilled had discoveries. Thesefrom two other neighbouring discoveries were the first in Srifields, Raageshwari and Saraswati, Lanka in 30 years, and have helped Potentially higher resource open up the frontier Mannar BasinCairn India’s production fromRajasthan has reached 175,000 base in Rajasthan. After a for future opportunities. thorough review, the Rajasthanbopd. block’s resource potential was estimated at 7.3 bn boe gross in-Sales agreements for place. There have been exploration Engineerslarger off-take. Given the upsides — with the prospective at the Boilerincreased production from resource base rising from an Stack, MPT
  8. 8. 12 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 13MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS BHAGYAM N-I-NORTHFollowing a comprehensive review, the Rajasthan block’s resource potential was boe gross primarily due to generation S HAKTI of additional leads and prospects. S HAKTI N Eestimated at 7.3 bn boe gross in-place. There have been exploration upsides — • The Company with ONGC, its JV N-Iwith the prospective resource base rising from an earlier estimate of 2.5 bn boe partner, is working with GoI to obtain NC WE ST OI L & GASgross in-place to 3.1 bn boe gross in-place the necessary approvals required BHAGYAM SOUTH to carry out further exploration and MANGALAThe Rajasthan Project • appraisal activity in the block. The discovered resource base has MANGALA BAR M E R H I LL AIS HWAR IYA increased from 4.0 bn boe gross N-EThe Rajasthan project is crucial for the the project was signed on 15 May, 1995. independent estimate of reserves and in-place to 4.2 bn boe gross in- DEVE LOPM E NT AR EA 2 VAN DANA Awarded November 2008nation. Oil production from the project In 1997, Cairn acquired an interest in the contingent resources; it also reviewed place. This is due to an increase in N-P VIJAYAhelps the country to reduce significant block. In 2002, Cairn acquired 100% of the majority of the leads and prospects. the Stock Tank Oil Initially in Place DEVE LOPM E NT AR EA 3 G S-V Awarded December 2008quantities of oil imports. the exploration interest and assumed D&M also undertook a separate reserves (STOIIP) from Mangala and other SARASWATI CR E ST KAAM E S HWAR I WE ST-6 GAS the role of operator. certification exercise on behalf of the Rajasthan fields. SARASWATI KAAM E S HWAR I WE ST-3 GASThe Mangala, Bhagyam and Aishwariya RJ-ON- 90/1 joint venture (JV). • The Rajasthan block’s Expected KAAM E S HWAR I KAAM E S HWAR I WE ST-2 OI L(MBA) fields, among others, constitute Ultimate Recovery (EUR) has RAAG E S HWAR I OI L Rajasthan Hydrocarbon DEVE LOPM E NT AR EA 1Cairn India’s key assets in Rajasthan. • Based on the Company’s assessment, increased from 1.4 bn boe gross to 1.7 S HAH E E D TU KARAM OM BALE Resources Awarded October 2004The MBA are the three largest finds in the potential resource for the bn boe gross on account of increased RAAG E S HWAR I DE E P GASRajasthan. The Mangala field — considered Rajasthan block is now estimated at recoverable risked prospective G U DA OI L FI E LDto be the largest onshore hydrocarbon As mentioned earlier, during FY2012 7.3 bn boe gross in-place. This is resource estimates. GAS FI E LDfind in India in last two decades — was Cairn India carried out a comprehensive primarily due to an increase in the • Given these new evaluations, the OI L DISCOVE RY GAS DISCOVE RYdiscovered in January 2004. This was review of the resource potential of the exploration upside with the prospective total resource base now provides a OI L S HOWSfollowed by discoveries at the Bhagyam Rajasthan block. This was done using resource base now estimated at 3.1 bn basin potential to produce 300,000 OI L DISCOVE RY & GAS S HOWSand Aishwariya fields. To date, 25 detailed studies involving innovative boe gross in-place, versus an earlier bopd, subject to further investments 0 5 10 20discoveries have been made in the technologies and advanced geo- estimate of 2.5 bn boe gross in-place. and regulatory approvals. This is KI LOM ETR ESRajasthan block. Studies indicate that science. In addition, a specialist agency, • The Rajasthan recoverable risked equivalent to approximately 40%it has further potential for growth. The DeGolyer and MacNaughton (D&M), prospective resource has increased of India’s current crude oil Rajasthan BlockProduction Sharing Contract (PSC) for has conducted a study to arrive at an from 250 mm boe gross to 530 mm production. The Rajasthan Block approval for higher Mangala offtake of 150,000 bopd. • Cairn India is the operator with • Some other fields within the block 70% participating interest. Its joint have also commenced production. venture (JV) partner, ONGC, has a The Bhagyam field started 30% participating interest. production on 19 January, 2012 and • The block consists of three is currently producing at around contiguous development areas: 25,000 bopd. Saraswati began (i) Development Area (DA) 1, production on 27 May, 2011 and has which comprises the Mangala, produced over 75,000 barrels of Aishwariya, Raageshwari and oil till date. Raageshwari, which is Saraswati (MARS) fields; (ii) DA primarily a gas field with marginal 2, consisting of the Bhagyam and oil, also commenced production Shakti fields; and (iii) DA 3, having on 8 March, 2012 and is currently the Kaameshwari West fields. producing in excess of 250 bopd. • At present, the block is producing 175,000 bopd, thanks to GoI
  9. 9. 14 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 15MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS Total Resource Potential (mm boe) RJ gross in-place resource 7,278 11 Expected Ultimate 24 Recovery 1,739 from previous % increase 2,168 2,010 3,100 EXPLORATION BH+19 Disc MBARS* 1,044 (~48%) 530 (~17%) 165 (~8%) Gross Gross EUR* Gross Gross EUR Gross Gross EUR in-place in-place in-place Under Development Future Development & Prospective Resource Expected Gross Production (kbopd) 300*** Significant part of 240*** 175 April 2012 CY2013** Note: *Gross EUR Includes EOR potential of 238 mm bbls; balance 70 mm bbls booked as 2P reserves MBARS – Mangala, Bhagyam, Aishwariya, Raageshwari, Saraswati ** Sometime in CY2013 Company upgraded the numbers as on 31 March, 2012 *** Subject to approvalsMangala, Bhagyam, Mangala of 62 development wells have beenAishwariya and Other drilled till date with 21 producers and At Mangala, a total of 148 development wells four injectors operational; 12 producerRajasthan Fields have been drilled and completed with 96 wells are yet to be drilled. Both Mangala producers and 33 injectors operationalised. and Bhagyam are connected to theThe Mangala, Bhagyam and Aishwariya The Company has successfully drilled and Mangala Processing Terminal (MPT),(MBA) fields have gross recoverable oil completed 11 horizontal wells at Mangala. which processes the crude oil from thereserves and resources of over one bn Going forward, the Company intends to bring Rajasthan fields.boe. This includes proven plus probable other wells on stream in a staged manner.(2P) gross reserves and resources of 636 Aishwariyamm boe with a further 308 mm boe or Bhagyammore of EOR resource potential. Today, The Aishwariya field is the thirdMangala and Bhagyam are cumulatively Bhagyam is the second largest field in largest discovery in the Rajasthancontributing more than 20% of India’s the Rajasthan block, with an approved block. Following an assessment of Monitoringcurrent domestic crude oil production. production plateau of 40,000 bopd. A total higher production potential and activity at a Train location, MPT
  10. 10. 16 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 17MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS Enhanced Oil Recovery What are we doing and what • Preparations for next phase of are the results? ASP flooding are in progress Based on the oil and reservoir Based on the positive response, a properties, Cairn India recognised full field polymer flood development the potential for EOR application in plan has been prepared for Mangala. the MBA fields early in their life. The development plan would include: • Drilling of new injector wells from Screening and laboratory the existing 15 wellpads evaluations identified chemical • Formal approval from the EOR methods viz. Polymer Flooding JV partner and regulatory and Alkaline-Surfactant-Polymer authorities. (ASP) flooding as the most suitable methods for the MBA fields. Accordingly, the Company has booked 2P reserves of 70 mm bbls. We are currently conducting an EOR pilot in the Mangala field. Details of Going forward, post Mangala which are: implementation, we also intend to • Eight wells including four injectors, implement chemical flooding in one central producer and three Bhagyam and Aishwariya fields. observation wells were drilled for this test The current assessment of the • Polymer injection was started EOR resource base is more than through newly built facilities in 300 mm bbls of incremental August 2011. Polymer flood results recoverable oil from the MBA Night view of were positive fields. Raageshwari Gas Terminal Start of Polymer Injectiondesign optimisation due to increased Raageshwari Deep Gas Field Saraswati and was earlier envisaged. The Companyreserves and resources, Cairn India Raageshwari Fields has carried the resource potential inhas commenced development work in The Raageshwari Deep Gas field is books as contingent resources. Fieldthe field. meant to supply gas to meet the The Saraswati Field, which commenced Development Plans (FDPs) for four Water cut energy requirements at the MPT and production in May 2011, is currently fields have been submitted; and FDPsThe development will include nine the Mangala Development Pipeline, producing at a rate of 250 bopd. Till date, for remaining fields are under variouswell pads, 36 producer and 15 injector which runs approximately 670 km from it has produced over 75,000 barrels of stages of preparation.wells. Well fluids from Aishwariya will Barmer to Viramgam to Salaya and then oil. This oil is processed at the MPT, andbe collected at a Cluster Well Pad — on to Bhogat, near Jamnagar, on the blended with the Mangala oil which is Barmer Hill and other Fieldsand the carbon dioxide rich associated Arabian Sea coast. sold through the pipeline. The marginalgas will be separated before oil field at Raageshwari also commenced Evaluation of other discoveries with thetransporting the well fluid to MPT. During FY2012, the Company carried production in March 2012. objective of optimising the Rajasthan Oil rate (bopd) Water cut (%) out drilling and completion of additional development is currently under way. Oil rateThe Company received JV approval wells to augment gas production from Satellite Fields To test the potential of the Barmer Hillin December 2011 to start work on the field as well as water production formation, Cairn India has planned athe field. Hence, it has awarded key from the nearby Thumbli saline aquifer In Rajasthan, there are 19 other discoveries pilot hydraulic fracturing programme,contracts including the main EPC; and water field. beyond MBARS and Barmer Hill — referred subject to GoI approval. A declaration Timethe contractor has been mobilised on- to as the satellite fields. These have been of commerciality for the Barmer Hill Schematic illustrating success of polymer pilot; appreciable declinesite. Crude oil production is expected Application of new fracture stimulation tested for hydrocarbons and have prospect was submitted to the GoI in March 2010, in the water-cut following polymerto commence towards end CY2012, and completion technology has proven for commercial development. In fact, Cairn and an FDP is under preparation. A injection with a simultaneoussubject to JV and GoI approval. to be successful in the field. India’s recent technical work indicates a staged development is being planned to increase in the oil rate higher potential for these fields than what monetise this reservoir.
  11. 11. Assessment results forGlobal Hydrocarbon mean, undiscovered, technically recoverableResources oil for provinces of the world by regionUS Geological Survey (USGS) World PetroleumResources Project released new estimates for theUndiscovered Conventional Oil & Gas Resources ofthe World, 2012This is a complete reassessment of the world sincethe last report was published in 2000 66,211In this study, 313 Assessment Units within 171geologic provinces were defined and assessed for 83,386undiscovered oil and gas accumulations 9,868For undiscovered, technically recoverableresources, the mean totals for the world are:• 565,298 million barrels of oil (MMBO) 111,201 5,855 47,544• 5,605,626 billion cubic feet of gas (BCFG)• 166,668 million barrels (MMBNGL) of natural gas liquidsThe assessment results indicate that about 75 115,333percent of the undiscovered conventional oil ofthe world is in four regions: (1) South Americaand Caribbean, (2) Sub-Saharan Africa, (3) 125,900Middle East and North Africa, and (4) the Arcticprovinces portion of North America. Significantundiscovered conventional gas resources remain Note: Figures in mm bblsin all of the world’s regions Source: 1. An Estimate of Undiscovered Conventional Oil and Gas Resources ofHydrocarbon Reserves the World, 2012, World Petroleum ResourcesThe E&P industry accordingly has significant Project, USGSpotential to increase world’s proved reserves 2. BP Statistical Review of World Energy, June 2012 Rajasthan Block Resource Potential RJ Block Resource Potential RJ Block Exploration Potential · Potential resource for the block now Over the years, world proved reserves have continually increased: The reserves +11% estimated at 7.3 bn boe gross in-place increased from 1,032 thousand million bbls at beginning of 1992 to 1,652 thousand million +24% bbls at the beginning of 2012 · Exploration potential now estimated at 530 mm boe gross recoverable risked India, though, constitutes an insignificant part of the world pie: Indian proved reserves prospective resource represent 0.3 percent of the world’s pie, but its share in consumption pie is 3.9 percent 6.5 7.3 +24% 3.1 2.5 +112% · Increasing confidence on the Mangala India’s Proved reserves base has fallen from 6.1 thousand million bbls at the 1.4 1.7 0.53 EOR polymer pilot led towards booking of 0.25 beginning of 1992 to 5.7 thousand million bbls at the beginning of 2012 70 mm bbls of gross 2P reserves Gross in-place Expected Gross in-place Recoverable Resource Ultimate Recovery Resource bn boe gross in-place 31 March, 2011 31 March, 2012
  12. 12. 20 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 21MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSISThe Company became the first operator in India to successfully deploy straddlestimulation technology for production and injection wells in the Rajasthan blockWell Services and Production Optimisation Cairn India’s endeavour is to maintain The treatment techniques were utilised plateau production in Rajasthan for as to stimulate wells using various chemical Well Bore long as it is physically and geologically recipes, which were developed through possible. Doing so requires the use of comprehensive laboratory analysis and novel, state-of-the-art well services practical observations. and intervention technologies. Cairn Coil Tubing India has applied some of the best such Advanced Down-hole Tools interventions in Rajasthan. Here are some examples: High impact Roto-Jet cleaning Casing technology: This has been effectively used to clean-out deposits such as Straddle Stimulation sediment, wax and scale through the Technology use of ‘stress-cycling’. Removal of such deposits has led to increased The Company became the first operator productivity of certain producer wells, in India to successfully deploy straddle particularly those in which inflow stimulation technology for production control devices were installed. Thus far, and injection wells in Rajasthan area. incremental production of approximately Operated through a tele-coil, the 1,850 bopd has been achieved through system is an advanced version of the this technology in three producer wells. conventional coiled tubing string, and Perforation is used to capture real-time data, which Roto-Pulse technology: By creating allows for more accurate understanding Coil tubing Packer of the reservoir’s response to different hydraulic vibrations down-hole, this tool operations at the stimulation treatments. effectively dislodges ‘plugging fines’ and Mangala field Damaged Perforation Zone Packer 1 2 3 4 5 6 Perforation Accurate Allowed treatment Optimal usage of cost Delivered conformance Avoid corrosion Removing blockage placement of under a positive intensive chemicals, in water injection wells and erosion of Well from SSDs and ICDs; Key advantages of treatment fluids well pressure thus thus making large thus enhancing well completions by increase production Straddle Stimulation across non- mitigating the need scale application potential and allowed limiting the exposure from non-producing technology: contributing to ‘kill’ well during economical commencement of to corrosive treatment zones sands operations EOR polymer pilot chemicals Straddle Packer Schematic
  13. 13. 22 I CAIRN INDIA ANNUAL REPORT 2011-12 CAIRN INDIA ANNUAL REPORT 2011-12 I 23 MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS DATA PROCESS FLOW Plant Data Server Application Software Verify Customised Well Test Pages SCADA Well Log Manual Data Reports Production DCS Well Config Dashboards System Outputs Allocation Exaquantum Coefficient i. Daily Production Report Historian SQL DB Generator ii. Joint Venture Report Real Time Data Real Time Reconcile Reporting & iii. Real time Data Historian Validation Database Data Historian Visualisation Visualisation iv. Real Time Optimisation v. Process Integration vi. Common Production Production Production Reservoir Data Store Operations Optimisation Development Well Services JV / DGH Management Process flow of the Digital Oil Field other undesirable deposits such as wax Thus, production was regained without Barmer and Gurgaon for the storage and scale, which retard well productivity. substantial production down time. of DCS data It has delivered excellent results in • Remotely accessing DCS screens producer wells which were installed with Digital Oil Field (DOF) at the Company’s offices in the MPT sand screens. Thus far, an incremental and Gurgaon production of approximately 5,400 DOF is a key technology project which • Developing a ‘Well Test Interface’ bopd has been achieved through this was conceptualised during the Rajasthan to record daily well tests technology in six producer wells. field development phase. It integrates • Installing a main Production Server the production process with efficient and an alternative Test Server Coiled tubing conveyed perforation: well monitoring — thus optimising the for uninterrupted reporting and This technology was applied to execute entire asset. DOF provides a user friendly, monitoring, while simultaneously under-balanced perforation in order web-based interface with enhanced data continuing development activities to minimise near-well-bore damage mining and visualisation capabilities. • Setting up a centralised database — usually caused due to conventional It also acts as a central location for reconciliation package which is now explosive based perforation. Moreover, accessing real-time data available becoming the central database for it has helped to optimise the time spent through distributed control systems/ production related data in perforating long intervals, particularly supervisory control and data acquisition • Incorporating a ‘Production in water injector wells, thus reducing (DCS/SCADA) systems — which involves Reporting System’ (PRS) which the cost of large scale perforation manually entered production data, includes Mangala and the JV’s daily operations. laboratory data and other allocated production reports production as well as field-level data. Perforation Using Reactive Element Given below are some details. Commissioning of the DOF project for Charges: This approach was utilised Mangala in November 2011 marks an to conduct a balanced perforation in • Capturing real time well-head important milestone for the Company. water injector wells. This avoids debris parameters from nearly 200 wells Thanks to it, the Rajasthan project deposition in perforation tunnels — a and process parameters from DCS/ has seen significant efficiency gains phenomenon associated with regular SCADA and cost reductions. This is largely on explosive based perforation. • Allowing a unique production account of smart monitoring, error free allocation system with two different production reporting, early detection Advanced Fishing and Milling methods for a more robust and of well productivity and injection Technology: State-of-the-art technology, reliable well-head level allocation issues, and troubleshooting of networkSlickline activity such as indexing tools and flow-activated • Configuring modules to capture the bottlenecks. Going forward, Cairn Indiain progress at elbows, were applied to overcome down- crucial manual production data intends to expand the DOF and the PRSBhagyam field hole complications in certain cases. • Setting up of high-end servers at to the entire Rajasthan field.