Cairn Oil & Gas is spending heavily on its core RJ-ON-90/1 onshore asset in India's Rajasthan region, with several key projects already under way to substantially increase oil and gas production from the acreage, writes Nishant Ugal.
The Vedanta Resources subsidiary operates the prodigious Mangala, Bhagyam and Aishwariya (MBA) oil and gas fields in Rajasthan, which together produce about 160,000 barrels of oil equivalent per day.
However, Cairn plans to add at least 100,000 boepd of production during the medium term through a mix of enhanced oil recovery and development of tight oil and gas projects.
About $1.1 billion is likely to be spent on EOR projects alone in Rajasthan, with a target to drill more than 300 wells.
The polymer-flood EOR project at Mangala is now being replicated at Bhagyam and Aishwariya.
Cairn is hopeful that application of the technology at the two fields could lead to an additional 5% of recovered resources over the life of the fields.
The company also plans to carry out alkaline surfactant polymer (ASP) flood across the MBA fields, anticipating an additional field-life recovery rate of at least 10%.
Meanwhile, more than $600 million worth of investments has been lined up for tight oil and gas development projects in the Rajasthan asset.
Cairn is presently producing about 45 million cubic feet per day of gas from the Raageshwari Deep Gas (RDG) project, which is likely to be ramped up to more than 150 MMcfd, following the second expansion phase of the gas project.
Petrofac was awarded a $233 million engineering, procurement and construction deal earlier this year for the second phase of Cairn’s RDG gas field development.
The UK-based contractor says it picked up the contract for integrated gas surface facilities, including pre-commissioning and commissioning, with a duration of 23 months.
The RDG-2 workscope includes well pads, flowlines and a new gas processing terminal.
While Cairn’s Rajasthan asset has been a predominantly oil producing block, the RDG development is likely to enhance its gas production capacity substantially.
Cairn believes its recent exploration campaign in Rajasthan has unlocked vast volumes of gas potential, with further upside anticipated as more exploration wells are drilled.
“The RDG field is estimated to hold between 1 trillion and 3 trillion cubic feet of gas in-place, with an estimated recovery factor of over 50%,” the company has claimed.
Additionally, Cairn is progressing with tight oil development at the Aishwariya Barmer Hill formation in the Rajasthan block.
More infill and upgrade projects involving capital expenditure of $300 million and comprising 45 wells are also being taken up.
Cairn chief executive Sudhir Mathur says the operator is carrying out further exploration at its Rajasthan asset.
“We are investing in exploration. We have identified a number of high impact un-drilled leads and prospects in Rajasthan,” he said.
The company is also expanding the liquid handling capacity at the Mangala processing terminal by almost 30%.
More than $1.5 billion worth of contracts have already been awarded by the operator for the various projects being carried out at Rajasthan, with the remaining contracts expected to be awarded within months.
Cairn is also seeking a 10-year extension to the Rajasthan block’s existing production sharing contract, which expires in 2020.
The company is believed to have initiated the process earlier this year and Mathur is confident the company will soon secure the extension.
The Indian government approved a policy last year for extending PSCs for oil and gas fields signed before changes to the country's exploration and licensing policy went into effect.
The new policy is likely to benefit players including Cairn, but the company is expected to pay an additional 10% on petroleum profits to the government during the extension period.
However, Cairn has been contesting the increase and the matter is presently in arbitration in an Indian Court.
Cairn Oil & Gas holds a 70% stake in the Rajasthan block, with India's Oil & Natural Gas Corporation holding the remaining 30%.