Cairn India scouts for oilfield services firms in a bid to cut cost, boost output  

Cairn has held a round of discussion with two global oil and gasfield service providers and is exploring various partnership options with them and with others


Cairn India needs statutory approval for transferring its production-sharing contract with the government to the merged entity. Photo: Reuters
Cairn India needs statutory approval for transferring its production-sharing contract with the government to the merged entity. Photo: Reuters

New Delhi: Cairn India Ltd., which is in the process of getting merged with Vedanta Ltd., is scouting for global oilfield services companies like Schlumberger Ltd. and Halliburton Co., to take over operations of its key hydrocarbon assets in a bid to cut down expenses and boost production within a short span of time. 

Besides, parts of the company handling support services such as finance, statutory compliance and human resources will become part of Vedanta Ltd. post merger, which is expected to be completed in the first quarter of this calendar year. Cairn India and Vedanta Ltd; are owned by UK-listed natural resources giant Vedanta Resources Plc.

Cairn India said in a statement to Mint ,in response to emailed queries, that the idea is to monetize its resource base with further investments. The company has held a round of discussion with two global oil and gasfield service providers and is exploring various partnership options with them and with others. 

The exact nature of the arrangement will be worked out keeping in mind the provisions in Cairn’s production sharing contract with the government for the hydrocarbon assets. 

A person with direct knowledge of the matter said on condition of anonymity that partnerships are being explored for the assets of Mangala, Bhagyam, Aiswharya, Barmer Hill and Raageswari Deep Gas fields in Rajasthan. The move is in line with recommendations made by the Boston Consulting Group, said the person.

“We are planning to have a unique partnership approach with global oil and gas companies to leverage full potential of our resources. The model will open up avenues for introduction of new and latest technologies for exploration and production to monetize India’s hydrocarbon reserves. The proposed Cairn initiative to identify technological partnerships to unlock resource potential, evoked very positive response,” said the statement from Cairn, adding that the idea was to further improve economics of its key projects. 

The company, which on last Thursday reported a nearly 15-fold jump in profit after tax in the October-December period to Rs 604 crore from a year ago, said on that day quoting acting chief executive officer Sudhir Mathur that the company was in active discussions with world class oilfield services companies to partner for “end to end outsourcing of certain projects” meant to help in further optimizing costs, expedite project execution through better vendor coordination, and act as a force multiplier. 

Cairn’s plan to outsource operations comes in the wake of oil and gas field services becoming cheaper in the wake of global exploration companies cutting down capital spending due to muted crude oil prices. 

Cairn’s statement to Mint said the merger will be positive as it will generate value for the shareholders and de-risk Cairn India by providing access to Vedanta’s portfolio of diversified assets in a volatile market.

The company, however, denied any plans to rationalize manpower for any function, post-merger. A company official, who asked not to be named, said that while balance sheets of the two companies will get merged, the merged entity will still preserve Cairn brand for its hydrocarbon business.

Cairn needs statutory approval for transferring its production-sharing contract with the government to the merged entity.

Cairn statement also said, quoting group chairman Anil Agarwal, that the company was committed to invest Rs. 30,000 crore to add 1,00,000 barrels of oil and oil equivalent over the next three years, primarily from its prolific Rajasthan fields. 

At present, Cairn accounts for 27% of India’s crude oil production and wants to raise its share to 50% over the next few years

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