Towards newer energy outlook
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Towards a newer energy outlook

12:09 PM, 11th November 2019
Ajay Kumar Dixit, CEO, Cairn Oil & Gas
Ajay Kumar Dixit, CEO, Cairn Oil & Gas.

In an interview, Ajay Kumar Dixit, CEO, Cairn Oil & Gas discusses how India has a diverse set of exploration opportunities in the oil & gas industry. He also touches upon the innovative approaches that will help to improve overall domestic oil production.

By Shivani Mody

Global trends in the oil & gas industry.

The shale revolution continues to shape the global oil & gas market. Powered by strong shale growth, the US has emerged as the largest producer of crude oil globally, ahead of Saudi Arabia and Russia. This is having a strong downward impact on prices and has forced OPEC and Russia to cut production to stem price declines.

Another macro trend is the global move towards a gas-based economy as countries like China, EU Nations and India push for higher share of natural gas in their energy mix. With an optimistic outlook for natural gas, production of gas and supporting infrastructure like pipelines and LNG projects have become more attractive.

For example, per International Energy Agency, developing countries in Asia – led by China – dominate the rise in long-distance gas trade; more than 80 percent of the growth to 2040 comes in the form of LNG.

A major shift has also been seen in oil & gas growth centres. Historically, demand centres for oil & gas were developed economies, the US and EU. Today, the markets of oil & gas have shifted towards Asia, driven by the economic growth in China & India.

Oil & gas activity in India.

India has a diverse set of exploration opportunities on offer which is driving uptick in activities. 55 blocks have been awarded under the first round of the Open Acreagre License Policy (OALP). Early exploration activity is already underway in OALP 1 blocks.

Similarly, the government of India has also offered many blocks under the Discovered Small Fields (DSF) Policy. All these blocks would, in the short- to medium-term, translate into higher exploration and development activities.

Concurrently, the government is improving the competitiveness of its upstream sector through targeted policies, which has the potential to attract investments and further improve exploration activities.

Potential for the industry in India.

Exploration & production, and gas production & marketing show significant growth potential. India has already awarded 55 blocks (60,000 sq. km.) during the first open OALP round in 2018. Another 37 blocks (60,000 sq. km.) are on the verge of being awarded under the OALP-2 and -3 rounds.

Similarly, India has a vision to increase the share of gas in the energy mix to 15 percent from 6.2 percent. Even a partial achievement of this vision would lead to a more rapid increase in imports as demand will outpace production growth.

On the downstream side of the business, the government’s clear focus on increasing the penetration of city gas will drive growth. So far, PNGRB, the downstream gas regulator, has authorized 228 Geographical Areas (GAs) for development of CGD network across country till 10th CGD bidding round. 298 districts have been covered under 9th and 10th CGD bidding round for supply of PNG and CNG.

Demands from oil & gas industry.

Global supply disruptions that have emerged recently due to geopolitical tensions are key concerns for producers as well users of oil & gas. It is important that there is adequate oil & gas supply with stable prices, to protect the needs of oil & gas users.

Energy outlook for developed vs emerging markets.

Per International Energy Agency’s World Energy Outlook 2018, in 2000, more than 40 percent of global energy demand was in Europe and North America and some 20 percent in developing economies in Asia. By 2040, this situation is to be completely reversed.

Clearly, China and India represent the new geography of energy. These markets will drive world’s demand growth and hence offer significant market potential.

Use of digitalization in oil & gas processes.

At Cairn Oil & Gas, Vedanta Ltd, our push is to increase production and contribute 50 percent to India’s domestic crude production. This is aided significantly by the deployment of cutting-edge technology, achieving several milestones in the journey. Project Nirmaan, the digitalization project of Cairn, is significantly impacting the following areas, among others:

  1. Digital-led subsurface and production optimization
  2. Data-driven subsurface workflows automation
  3. Integrated asset management
  4. Tech-enabled best-in-class Health, Safety, and Environment (HSE) practices
  5. A fully insights-driven corporate functions portfolio

Development in the asset integrity management systems.

Some of the latest developments in asset integrity management for the oil & gas sector relate to application of technical, operational, and organizational solutions to reduce risk of uncontrolled release of formation fluids throughout the life cycle of a well, along with best safety practices.

One of the significant challenges faced by the oil & gas industry is related to data accuracy and availability, multiple data sources and formats, and streamlining and standardizing data management processes. Manual tracking and monitoring of issues related to well integrity are reasonable in small fields, but in large oil fields this approach can invite human errors. Cairn needed an interoperable technology for efficient integrity- and flow-assurance management throughout all well lifecycles. Hence, the search for the right tool for digitalization and automation of well integrity management system was initiated in June 2014.

Cairn implemented a Smart Well Integrity and Flow Assurance Management System (SWIM) to efficiently manage risks from integrity and flow assurance issues. SWIM automates the monitoring and management of entire well stocks. The company used AssetWise Operational Analytics to provide a flexible and connected data environment that interfaced with the company’s existing internal web portal and integrated data from seven disparate sources. Bentley Systems provides the oil and gas industry with comprehensive software solutions to accelerate project delivery and improve asset performance. This technology automated the identification of an asset’s integrity based on risk and notification to responsible stakeholders, automation of all flow assurance, and well stimulation-related data, therefore enabling timely corrective actions.

The software provided the foundation for successful SWIM implementation, leading to enhanced decision-making based on accurate data, optimized preventive maintenance, and automated performance monitoring and analysis of operations, which reduced well non-productive time during interventions by around 10 percent. The digital well integrity and flow assurance management system facilitates clear visibility on compliance status, minimizing instances of overdue compliance and improving oil realization, while reducing costs for such activities.

This has led to some the following benefits, among many:

  1. Preventive Maintenance – The software is used to generate preventive maintenance programs for X-mas tree and sub-surface safety valves.
  2. Spares Management – The software retains a full history of failures encountered in the field including frequent and rare failures. This data source will be utilized for management of spares corresponding to the frequent and rare failures.
  3. Well Integrity Awareness – Successive Amulet training sessions conducted for various groups have led to increased awareness of Well Integrity and Data Management within these groups.

We are also deploying Exception Based Surveillance (EBS) through our Digital Nirmaan program. EBS raises analytics-driven exceptions on systems that need proactive maintenance so that the issues can be addressed before they occur. When process and operating parameters deviate outside the operating limit, the EBS solution alerts the respective teams for rapid action. We use MySmart Alert or Sentinel's intelligent real-time Complex Event Processing engine that maintains a constant watch over plants and field operations, and rapidly accesses and analyses the situation. It triggers alarms and alerts when an incident occurs, allowing less staff to effectively manage larger portfolios and more assets.

Commitment to increase domestic crude production.

Cairn is on a growth path with a stated commitment to increase domestic production and contribute 50 percent to India’s domestic crude production. Currently, we operate ~25 percent of India’s domestic production. With the addition of 41 new blocks allotted under Open Acreage Licensing Policy (OALP) I and two blocks awarded under Discovered Small Fields (DSF) II, Cairn's acreage is now ~55,000 sq km, catapulting it to be among the largest exploration companies globally. With a strong growth pipeline of assets in various stages of development, Cairn aims to parallelly expedite exploration and production from the new blocks and achieve its vision to take its overall production to 300 kboped.

Innovations for oil production & process.

Some of the innovative approaches followed by the company are as follows:

Enhanced Oil Recovery (EOR): The world’s largest polymer flood project, and the world’s largest Alkaline Surfactant Polymer (ASP) project -

- EOR is a term for special techniques used to increase the amount of crude oil that can be extracted from a field, over and above conventional primary depletion, or basic water flooding, which typically will recover 20-40 percent of the Stock Tank Oil Initially In Place (STOIIP). EOR is used for improving oil recovery, particularly in older and declining oil reservoirs. We executed the world’s largest EOR polymer flood project in our Rajasthan assets.

- Alkaline-Surfactant-Polymer (ASP) flooding is a method whereby alkali, surfactant, and polymer are injected into the reservoir to flush out crude. Polymers increase the viscosity of injected water, which improves macroscopic sweep efficiency by stabilizing the displacing front and counteracting heterogeneity effects. Surfactants, on the other hand, decrease the interfacial tension between the injected water and crude oil, which improves microscopic displacement efficiency by mobilizing trapped oil. Alkaline chemicals generate soap when reacting with crude oil, which reduces surfactant adsorption to grain surfaces. We are in the process of piloting the world’s largest ASP project.

Skin Effect Heat Management System: The world’s longest continuously heated and insulated pipeline -

- Cairn built the Mangala Development Pipeline (MDP), which is the world’s longest continuously heated and insulated pipeline (670 km), starting from the Mangala Processing Terminal to the Gujarat coast in Bhogat via Salaya, for transporting crude oil.

- The pipeline passes through eight districts and more than 250 villages. In addition, there are four branch lines ranging from 2.5 km to 21 km, delivering crude to locations en route.

- The MDP is not a conventional pipeline. Its technological ingenuity was necessitated on account of the waxy nature of crude oil. The challenge was to ensure that the crude oil remains above the Wax Appearance Temperature (WAT) of 65°C throughout its entire length. This required Cairn to build a continuously heated and insulated pipeline to maintain mobility and flow through over the oil’s movement through the entire length of the pipeline.

- A dedicated state-of-the-art Skin Effect Heat Management System (SEHMS) and power generation infrastructure has been deployed all along the pipeline to maintain optimum temperature requirements for uninterrupted flow of crude oil. The pipeline has been in operation since June 2010. Its heat output meets all design requirements and is highly reliable.

Artificial Lift

- Artificial lift provides energy to lift fluids to the surface and improve well productivity. Of approximately one million oil and gas wells across the world, more than 90 percent flow on artificial lifts. At Cairn, more than 95 percent of the total hydrocarbons produced are artificially lifted using fit-for-purpose artificial lift technologies. The organization is at the forefront of installing a wide range of cutting-edge artificial lift techniques to optimize and extend production. The primary methods of artificial lift in use at Cairn are jet-pump, Electric Submersible Pump (ESP), Progressive Cavity Pump (PCP), Sucker Rod Pump (SRP), and gas lift.

Enhanced oil recovery (EOR) program and opportunity.

Enhanced Oil Recovery projects have been key to increase and sustain our production volumes. The Mangala polymer project, which is one of the world’s largest polymer programmes, improved recovery factor by 8 – 10 percent beyond water injection. Now Alkaline Surfactant Polymer (ASP) will help to significantly enhance the recovery factor in Rajasthan’s Mangala, Bhagyam and Aishwariya fields. Through the ASP project we are envisaging another 8 – 10 percent increase in recovery factor.

With the Government of India announcing Enhanced Recovery Policy in October 2018, we are expecting significant interests from diverse set of players to bring in best-in-class technologies to improve India’s hydrocarbon recoveries.

New oil & gas discoveries in India.

Due to low oil prices, investments into the upstream sector globally fell sharply between 2014 and 2016. However, with recovery in prices, investments are flowing back in the sector. An uptick in exploration investments has the potential for more discoveries.

Natural gas & oil will continue to meet a major share of global energy demand over the next few decades.

India, specifically, holds lot of promise. Per new estimates, India’s Hydrocarbon Resource base has seen an increase of 49.1 percent. With over 200 billion barrels of oil equivalent (boe) of resources yet to be discovered, India offers significant untapped opportunities.

Company focus on sustainability.

At Vedanta, one of the world’s largest natural resources conglomerate, we stand for good business driven by a focus on inclusive development and sustainability, guided by our principles of Zero Harm, Zero Waste, and Zero Discharge.

At Cairn we follow robust Health, Safety, and Environment (HSE) practices. We have put in place a vision, objectives, strategies, systems, and trainings on health, safety, and environment. These are embedded across our operations, business processes, functions, and are a part of everything we do every day.

The company operates by:

  1. International standards that govern the oil & gas sector, and, all approvals, certifications, and guidelines required by the Indian (central and state-level) standards of safe and environment friendly operations.
  2. Furthermore, we comply with stringent standards at Cairn, and those of our global partners.

All of these are considered to develop a robust policy/practice to follow in our areas of operation.

Cairn follows stringent operating procedures, abiding by all the prevalent guidelines/conditions and stipulations provided by the government (MoP&NG/DGH/OISD). Government approvals include the process of abandonment after plugging of dry wells, as well as reclamation of the land at the end of the well operation. At the end of the field life and abandonment of drilling sites, decommissioning too is undertaken as per guidelines and stipulations of OISD/DGH, MoP&NG.

We extend the same guiding principles to our corporate social responsibility initiatives, where our approach focuses on long-term programmes aligned with community needs.

  • We design developmental programmes that scientifically identify, measure and address local community needs.
  • All programs are aligned with national priorities and the Sustainable Development Goals (SDGs).
  • Programs are deployed in partnership with leading and credible NGO partners and the government. This ensures program sustainability and a truly lasting impact on community livelihoods, living standards, and the environment.

Accordingly, over the course of the last year alone, Vedanta invested more than $39 million on globally-recognised community development initiatives spanning children’s well-being and education, women’s empowerment, sports, water, healthcare, and agriculture. These initiatives have cumulatively touched the lives of more than 3.4 million people in 1,400 villages, across the country.

Challenges in oil exploration & production segment.

Over the last many years, the government of India has introduced transformational policies like HELP / OALP / Enhanced Recovery amongst others.

In February 2019, the government approved major reforms in exploration and licensing policy to enhance exploration activities, attract domestic and foreign investment in unexplored/unallocated areas of sedimentary basins and accelerate domestic production of oil and gas from existing fields.

All these policies have potential to attract investments and enhance India’s production. However, many of these policies will see results over the next 5 to 7 years.

To meet the prime minister’s vision of reduced dependence on imports and increase domestic production by 2022, we need urgent policy reforms in Nomination, Pre-NELP and NELP. Key challenges faced are:

  1. Taxing production rather than profits.
  2. Lack of oil & gas marketing & pricing freedom.
  3. High rate of cess on oil production.
  4. Increasing GOI take during PSC extension policies.
  5. Operational challenges in executing Enhanced Recovery policy.
  6. Non-inclusion of oil & gas in GST.

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