Cairn bets on shale, sees 10% drop in India's oil imports at peak output

Vedanta-owned Cairn Oil and Gas is betting on its shale exploration programme in its prolific Rajasthan asset, estimating that shale oil and gas production may reduce India's oil and gas import by 10% when production kicks in.

"We will start shale exploration potentially in the next one or two months. With shale potential at 3 billion barrels of oil equivalent per day (boepd) we want to establish a reserve of 300 million boe and production target of 500,000 boepd. This will ultimately bring down oil imports by 10%," Prachur Sah, Deputy CEO, Cairn Oil and Gas told ET.

Shale is a type of natural gas trapped in fine-grained sedimentary rocks called shales. Cairn's onshore Rajasthan oilfields - Mangala, Bhagyam and Aishwariya (MBA) - are its flagship and most prolific assets. They jointly produce up to 20% of India's entire crude output.


Cairn aims to produce 50% of the country's oil and gas requirements but declining hydrocarbons production from the MBA fields has been a challenge. Cairn is planning to adopt enhanced oil recovery programmes to ramp up output. Last November, it tied up with oil field services majors Halliburton and Baker Hughes and more such tie-ups are in the offing.

In FY23, the company will invest $700 million on its exploration programme to boost production. In addition to the exploration programme in the Rajasthan block, Cairn plans to expand exploration and production from its offshore blocks. Cairn holds 55 exploration and production blocks in all and plans to invest as much as $5 billion over the next three years in exploration programmes.

"We are looking at a significant exploration spend next year again, to see how we can get some discoveries and bring them online," Sah said, adding that the advantage of exploring shale in Rajasthan is that the company does not have to build new infrastructure. "We can use our existing infrastructure to hook up the wells. So, we'll only have to drill more wells," said Sah.

If successful, shale could be a potential game-changer for India as it has been in the US. With the scarcity of any significant reserve finds in India over the past few decades, India's crude imports account for 85% of the import bill. The shale revolution that began in the US in the early 2000s helped it reduce its need for expensive oil and LNG. From an importer of oil, the country became an exporter of shale gas. The US shale revolution attracted RIL too, which bought stakes in three upstream oil exploration JVs with Chevron, Pioneer Natural Resource and Carrizo Oil and Gas, and a midstream JV with Pioneer between 2010 and 2013.

But after oil and gas prices crashed in 2014, shale too began to lose sheen. RIL has since divested its shale gas assets and exited from the business in North America.

After peaking at $107.95 a barrel in June 2014, oil prices plunged to $44.08 a barrel by January 2015 till it crossed the $100 a barrel mark again, last month.

In India, ONGC attempted shale exploration a few years ago before shelving the project after limited success.

On environmental concerns, Sah said: "We have put some plans in place to reduce our emissions and be carbon neutral by 2050. We are exploring the feasibility for repurposing hydrocarbon wells for geothermal energy."