Cairn Oil Starts Shale Exploration In Barmer
The company will drill at least three to four wells in FY23, said Prachur Sah, deputy chief executive officer of Cairn Oil.
Vedanta Group's Cairn Oil & Gas has started exploration for shale in Barmer, Rajasthan, with global energy major Halliburton Energy Services drilling the first well.
The company has completed the subsurface study and identified locations for shale activity in the existing oil fields of Barmer.
The company will drill at least three to four wells in FY23 in these locations, Prachur Sah, deputy chief executive officer of Cairn Oil & Gas, told BQ Prime.
Sah said the company has tied up with global energy majors Halliburton Energy Services, Schlumberger Ltd., and Baker Hughes to carry out drilling and exploration activity for shale in Barmer.
"We see a potential of one billion barrels of shale oil and gas from our Barmer fields. However, the reserves can only be determined after the completion of exploration activities,” Sah said.
The company hopes to drill a minimum of four wells in the current fiscal. However, further drilling activities will depend on the success of the initial wells, Sah said.
According to Sah, the company has the advantage of exploring shale in Rajasthan, where they do not have to build new infrastructure.
“We can use our existing infrastructure to hook up the wells. So, we will just have to drill more wells,” he said.
Shale has the potential to be a game changer for India, the way it was in the U.S. However, the execution of shale projects is costly and will hinge on supportive policy from the government, he said.
“We remain hopeful and have been in talks with the Indian government to help make shale commercially viable.”
Investments
Cairn plans to invest $5 billion to raise its overall crude oil production to 5,00,000 barrels of oil equivalent by 2025. "That will help us meet India’s 50% crude oil requirement," he said.
The company has already invested around $2 billion in the last two years and plans to invest another $3 billion in the next three years in areas such as the enhanced oil recovery project, the alkaline surfactant polymer project—used as a technologically upgraded mechanism to increase production from existing fields—and exploration activities.
The company expects that if the shale exploration is successful, it will entail an investment of over $2 billion to $3 billion.
The company is looking for government support in the form of incentives and lower taxes to attract global investors in the hydrocarbon sector.
“With the windfall tax on the production of crude oil, we are paying around 80% of our revenue in the form of taxes. Even without windfall levies, we were paying 70% of our revenue as tax to the government of India. Globally, the practice is around 20–25%."
He said they are in talks with the government to reduce these taxes to below 40% to buoy investor sentiment.
Ten-Year Extension For Barmer Fields
On Oct. 27, the company announced that it had secured approval from the government to extend the production sharing contract for its Rajasthan block for another ten years, until May 2030.
According to Sah, the PSC will boost capital expenditure and encourage private players to enter the sector.
“This extension will be a key determinant in our goal of doubling production and helping India achieve energy atmanirbharta.”
(Corrects an earlier version that misstated Sah's designation and surname)