Cairn India has released the operational and financial highlights for the six months ended June 30, 2008.
Cairn is progressing well on the activities in the Rajasthan block including Mangala, the largest oil discovery in India since 1985. The Company is currently developing the three larger fields in Rajasthan; Mangala, Bhagyam and Aishwariya (MBA), and this will provide much needed support to India's crude supplies.
India is the 4th largest oil consumer in the world and the consumption is growing at a 10 year CAGR of 4.2% compared to the world average of 1.5%. India imported around 71% of its total crude oil consumption of 2,748 kbpd in 2007. Once gross plateau rates of 175,000 bopd from the MBA fields are achieved in Rajasthan, Cairn will contribute more than 20% of India's daily oil production. The Company is proud to develop this landmark project of national importance which will help reduce India's dependence on crude import.
Oil field development work in Rajasthan has already started and an integrated upstream and midstream development is on course to produce first oil from Mangala in the second half of 2009. All the major contracts for equipment, long lead time items and civil and construction work have been placed under competitive market conditions.
The gross plateau production rate for the MBA fields is currently estimated at 175,000 bopd. Cairn is proactively working on Enhanced Oil Recovery (EOR) techniques to extend and enhance plateau production, and expects that the EOR techniques will lead to a potential to recover additional resources of more than 300 mm barrels of oil.
The Ministry of Petroleum and Natural Gas, Government of India has conveyed its agreement to shift the delivery point and also allowed multiple delivery points for sale of crude, clearing a long pending uncertainty around the Rajasthan crude evacuation. This will lead to cost recovery for the pipeline from the Rajasthan field to the Gujarat coast. This is a very positive development for the project and we have commenced the pipe laying work.
Along with our joint venture partner ONGC, we have already invested more than $1 billion in Rajasthan and plan to invest an additional $2.6 billion in the development in 2008 and 2009.
The Field Development Plan (FDP) for Bhagyam, the second largest field in the block, has been approved by the GoI on the basis of a currently planned plateau production rate of 40,000 bopd. The Mangala FDP in its present form was approved by the GoI on May 27, 2006. The Company has submitted a revision to the Mangala FDP to the Operating Committee of the Rajasthan block for considering certain key developments.
The key features of the Revision to the Mangala FDP are:
Cairn has an extensive portfolio of 14 oil and gas exploration, development and production assets -- 13 in India and one in Sri Lanka (Mannar Basin), for which an exploration license has recently been awarded by the Government of Sri Lanka. The Petroleum Resources Agreement for the offshore block SL 2007-01-001 was signed in July 2008. The block covers approximately 3,000 sq km in water depths of 200 meters to 1800 meters and marks the Company’s debut in the international exploration arena.
Cairn has also submitted bids in the Seventh New Exploration Licensing Policy round (NELP VII) in India and is awaiting the result announcement.
The exploration program for the coming months, which will include approximately 6 wells and several seismic acquisition programs, are aimed at securing future growth.
Production from the Ravva and CB/OS-2 oil and gas fields continues to provide important cash flow for re-investment in the Company's activities across India. Current producing blocks -- Ravva and Cambay -- produced around 71k boepd including gas in the first half of 2008. The JV partners reached the milestone of producing 200 million barrels of oil from the Ravva block and the CB/0S2 team achieved 6 million working hours without an LTI (Loss Time Incident which is an industry measurement for safe working conditions).
The income from operations in H1 2008 is Rs. 7,195 million** (USD 176 million) and is higher by 50% as compared to H1 2007. Profit after Tax (PAT) in H1 2008 is Rs. 2,550 million** (USD 63 million). The net cash available with the company as at 30th June 2008 was Rs. 35,287 million** (USD 823 mm) which, along with undrawn borrowing facility, will be used for projects development and growth of the Company.
Carin is consciously working to create appropriate growth opportunities in order to maximise shareholders' value. It has successfully completed US $625 million preferential allotments in volatile markets by issuing an additional 113 million shares to Petronas International Corporation Ltd and Orient Global Tamarind Fund Pte Ltd at Rs 224.30 per share. The deal was completed in April 2008 with the aim to provide financial flexibility for further growth opportunities.
The Company is working closely with local communities and the International Finance Corporation (IFC) to participate in socio-economic development in the areas of business presence and develop sustainable community programs respectively. IFC and Cairn India, in collaboration with the International Centre for Entrepreneurship and Career Development (ICECD), have set up an enterprise centre at the ITI Barmer. The Company understands the importance of climate change, hence it has been monitoring and setting targets for Green House Gas (GHG) emissions since 2000. The project is expected to generate significant revenues for the government and create more than 10,000 jobs in Barmer during the construction phase.
As a recognition of the various initiatives undertaken across the country, the TERI Corporate Award for Social Responsibility 2008 was presented to Cairn India Limited (under Category III) as an acknowledgement of our efforts in launching the Micro-Vendor Development Program, an initiative to meet the needs of the local community by creating sustainable livelihood opportunities at Ravva in Andhra Pradesh.
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