The reduction in oil prices over the past year cannot be ignored, and we have taken sensible steps to defer capex for the time being in line with the economic background.
Mayank Ashar, CEO, Oil & Gas
ResultsDuring the year we achieved:
- 211,671boepd, down 3%.
- In the Rajasthan block, the Aishwariya field crossed a production threshold of 30,000boepd in Q4 FY2015.
- Cairn India made 12 new discoveries and drilled and tested 1.5 billion boe of in-place hydrocarbons.
- Focus on completing polymer flood EOR project at Mangala, infill drilling in onshore fields and maintenance projects at the Mangala Port Terminal.
Our strategic priorities
- Rajasthan development
- Sustaining production at MBA fields through EOR, drilling campaign and facilities upgrade.
- To target world-class recovery and next generation of resources at Barmer Hill.
- Leverage gas potential through phased development ramp-up.
- Increase recovery from mature assets through infill drilling, technology adoption and development of satellite fields.
- Continue exploration and appraisal programme across the portfolio, focusing on Rajasthan.
- Pursue extension of Production Sharing Contracts.
|Net production – working interest||boepd||132,663||137,127||(3.3)%|
|Working interest production||mboe||48.4||50.1||(3.3)%|
Average gross production for FY2015 was 211,671 barrels of oil equivalent per day (boepd), 3% lower than the previous year. This was largely on account of planned maintenance activity at Mangala Processing Terminal at Rajasthan, higher than-expected water cuts at Bhagyam in Rajasthan and suspension of gas sales at Ravva for around three months as a result of the breakdown of the OMGC gas pipeline. This was partially offset by higher production at Cambay and better performance of the Mangala field in Rajasthan. In the Rajasthan block, the Aishwariya field crossed a production threshold of 30,000boepd in Q4 2015.
Both offshore assets have performed exceptionally well during the year. The Ravva block achieved over 30,000bopd in Q4 FY2015 after three and a half years, driven by successful application of 4D seismic technology, better-than-expected results from the infill drilling programme and the contribution from the RE-6 exploration well. Production at Cambay grew 8% year-on-year, driven by successful well interventions and ramp-up.
Gas development in the Raageshwari Deep Gas (RDG) field in Rajasthan continues to be a priority. Management Committee approval has been received for the RDG Field Development Plan for 100 million standard cubic feet per day (mmscfd) production and work on execution, planning and contracting is under way. In FY2015, RDG gas production was 16mmscfd and is expected to increase to 25mmscfd during FY2016.
Crude oil prices fell sharply in the second half of FY2015 as a result of increasing supply, a lower demand outlook and OPEC’s decision to maintain production levels. Average Brent prices for the year reduced 21% to US$85.4/bbl compared to FY2014.
|Average Brent prices (US$/barrel)||85.4||107.6||(20.6)%|
Revenue for the year was US$2,398 million, (after profit and royalty sharing with the Government of India), driven by weaker crude prices. As a result, EBITDA for FY2015 was lower by 37% at US$1,477 million. Overall operating costs in Rajasthan were US$5.8/bbl, an increase compared with US$3.9/bbl in FY2014 due to higher processing and increased well maintenance costs.
In line with global peers, we have revised capex for FY2016 from US$1.2 billion to US$0.5 billion, while deferring the rest. Of this around 45% has been allocated to core fields, 40% to growth projects and remaining 15% for exploration. Further, we will undertake projects that are economically viable at current oil prices, while actively re-engineering projects and renegotiating contracts to improve viability. We have spent US$1.1 billion in FY2015 out of the announced programme of US$3.0 billion, thus retaining the flexibility to invest the remaining US$1.4 billion in the future as oil prices improve and more projects clear investment thresholds.
In the core fields, our focus continues to be completing the polymer flood EOR project at Mangala, continued infill drilling in our onshore fields and maintenance projects at Mangala Port Terminal.
The Management Committee approved the Raageshwari Deep Gas FDP for 100mmscfd and contracting for this project is currently under way. The two key packages for this project will be the pipeline and the gas terminal EPCs. Likewise, an application has been submitted to PNGRB regarding the authorisation of a pipeline under their policy for Tie-in Provisions. The Terminal EPC is presently in the tendering process and the gas project is expected to be completed by the end of FY2017 subject to regulatory approvals.
(in US$ million, except as stated)
|EBITDA margin (%)||61.6%||75.9%||–|
|Acquisition related amortisation||697.6||721.0||(3.2)%|
|Share in Group operating profit (%)||11.9%||40.8%||–|
Since the recommencement of exploration in the Rajasthan block in March 2013, across FY2014–FY2015, Cairn India has made 12 new discoveries and has drilled and tested 1.5 billion boe of in-place hydrocarbons with an additional 0.8 billion boe drilled but yet to be tested. Additionally, Cairn has discovered 2C of 183 million boe in Rajasthan since resuming exploration. An additional 166 million boe of Prospective 2C has been drilled and awaits testing.
In FY2015, Cairn delivered the largest Exploration and Appraisal programme in its history, with 12 exploration and 22 appraisal wells drilled; totalling 34 wells during the year. Of the exploration wells drilled in the year, nine encountered hydrocarbons. In FY2015, six additional discoveries were announced taking the total number of discoveries since resuming exploration to 12.
During the next financial year, activity will continue to be focused upon appraisal of the Raageshwari Deep Gas Field and the key oil discoveries at DP, NL and V&V, with the objective of progressing these discoveries to development. Future programmes will also focus on identification of additional prospects that will act to replenish the inventory of exploration prospects.
At the KG offshore block, detailed planning for the exploration drilling campaign is under way and drilling is anticipated in the first half of FY2016. In South Africa, the Group continues to interpret the 3D and 2D seismic data across its block and add to Prospective inventory with parallel discussions ongoing with our joint venture partner on contractual terms. In Sri Lanka, whilst the Group has taken a non-cash impairment charge, it will continue to seek solutions and options to farm out interests.
Despite the partial deferral of capex, we expect production volumes to increase in FY2016 driven by our planned investment in the polymer flood at Mangala, the infill drilling across the Mangala Bhagyam and Aishwariya fields, infrastructure debottlenecking and maintenance projects.
Additionally, production upside in the near-term will come from other growth projects where we retain the flexibility and agility to switch on projects as they clear investment thresholds as oil prices improve.
In exploration, Cairn India will prioritise capital allocation for low-risk, high-potential prospects. Cairn India plans to spend around 15% of next year’s capex on appraisal, testing and seismic activity across our assets.