THE YEAR IN BRIEF
During FY2021, Oil & Gas business delivered gross operated production of 162 kboepd, lower by 6% y-o-y. This was mainly due to delay in execution of growth projects owing to the implementation of nationwide lockdown imposed by the Government of India to curb the spread of COVID-19 and natural reservoir decline at the MBA fields. The decline was partially offset by the addition of wells brought online as a part of Mangala Infill, MPT Upgrade, Aishwarya and Bhagyam Polymer and ABH. Business continues to drive all efforts towards volume growth through capacity additions, new wells and surface facilities. During FY2021, 74 wells were hooked up across all assets.
In OALP blocks, the initial phase of seismic acquisition programme has been completed in Assam, Cambay, Rajasthan and Offshore GS-GK region. Second phase is ongoing in Rajasthan and Cambay.
Early drilling opportunities have been identified based on reprocessing and interpretation of vintage data in Rajasthan, Assam and Cambay regions. First well KW-2-Udip has been drilled in Rajasthan. Drilling and related preparation activities are ongoing in Cambay and the North East.
THE YEAR IN BRIEF
During FY2021, Oil & Gas business delivered gross operated production of 162 kboepd, lower by 6% y-o-y. This was mainly due to delay in execution of growth projects owing to the implementation of nationwide lockdown imposed by the Government of India to curb the spread of COVID-19 and natural reservoir decline at the MBA fields. The decline was partially offset by the addition of wells brought online as a part of Mangala Infill, MPT Upgrade, Aishwarya and Bhagyam Polymer and ABH. Business continues to drive all efforts towards volume growth through capacity additions, new wells and surface facilities. During FY2021, 74 wells were hooked up across all assets.
In OALP blocks, the initial phase of seismic acquisition programme has been completed in Assam, Cambay, Rajasthan and Offshore GS-GK region. Second phase is ongoing in Rajasthan and Cambay.
Early drilling opportunities have been identified based on reprocessing and interpretation of vintage data in Rajasthan, Assam and Cambay regions. First well KW-2-Udip has been drilled in Rajasthan. Drilling and related preparation activities are ongoing in Cambay and the North East.
OCCUPATIONAL HEALTH &SAFETY
There are six lost time injuries (LTIs) in FY2021. The frequency rate stood at 0.16 per millionman hours (FY2020: 0.3 per million-man hours) amidst increased development activities. Unfortunately, there was also a fatality in one of the projects during the FY2021.
Our focus remains on strengthening our safety philosophy and management systems. We were recognised with awards conferred by external bodies:
Cairn Oil & Gas has taken various initiatives to prevent exposure to COVID-19:
ENVIRONMENT
Our Oil & Gas business is committed to protect the environment, minimise resource consumption and drive towards our goal of ‘zero discharge’. We have secured first runner-up position in Jury Special Mention Award on ‘Recycling of Produced Water for Injection Purpose’ under Sustainability 4.0 Award 2020 jointly instituted by Frost & Sullivan and TERI.
Highlights for FY2021 are:
PRODUCTION PERFORMANCE
| Unit | FY2021 | FY2020 | % change | |
|---|---|---|---|---|
| Gross operated production | Boepd | 162,104 | 172,971 | (6) |
| Rajasthan | Boepd | 132,599 | 144,260 | (8) |
| Ravva | Boepd | 19,177 | 14,232 | 35 |
| Cambay | Boepd | 10,329 | 14,479 | (29) |
| Oil | Boepd | 140,353 | 154,677 | (9) |
| Gas | Mmscfd | 130.5 | 109.8 | 19 |
| Net production – working interest | Boepd | 101,706 | 110,459 | (8) |
| Oil* | Boepd | 88,923 | 99,709 | (11) |
| Gas | Mmscfd | 76.7 | 64.5 | 19 |
| Gross operated production | Mmboe | 59.2 | 63.3 | (7) |
| Net production – working interest | Mmboe | 37.1 | 40.4 | (8) |
* Includes net production of 441 boepd in FY2021 and 483 boepd in FY2020 from KG-ONN block, which is operated by ONGC. Cairn holds a 49% stake.
OPERATIONS
Average gross operated production across our assets was 6% lower y-o-y at 162,104 boepd. The Company’s production from the Rajasthan block was 132,599 boepd, 8% lower y-o-y. The decrease was primarily due to the delay in execution of growth projects due to COVID-19 restrictions and natural reservoir decline at the MBA fields. The decline was partially offset by the addition of wells brought online as a part of Mangala Infill, MPT Upgrade, Aishwarya and Bhagyam Polymer and ABH. Production from the offshore assets, was at 29,505 boepd, 3% higher y-o-y, supported by production from new wells drilled through Ravva drilling campaign and production optimisation activities.
The production details by block are summarised below.
Rajasthan block
Gross production from the Rajasthan block averaged 132,599 boepd, 8% lower y-o-y. This decrease was primarily due to the delay in execution of growth projects due to implementation of the nationwide lockdown imposed by the Government of India to curb the spread of COVID-19 and natural reservoir decline at the MBA fields.
As part of the growth projects in Rajasthan 248 wells have been drilled. Of these 143 wells have been hooked up till date.
Gas production from Raageshwari Deep Gas (RDG) averaged 124 million standard cubic feet per day (mmscfd) in FY2021, with gas sales, post captive consumption, at 96 mmscfd.
On 26 October 2018, the Government of India, acting through the Directorate General of Hydrocarbons (DGH), Ministry of Petroleum and Natural Gas, granted its approval for a 10-year extension of the PSC for the Rajasthan block, RJ-ON-90/1, subject to certain conditions, with effect from 15 May 2020. In May 2018 the single judge had passed the order in our favour allowing extension of Rajasthan PSC on same terms. The GoI had appealed against the said order before the division bench of the Delhi High Court. Vide order dated 26 March 2021, the High Court has allowed the appeal of GoI against the single judge order.
We have served notice of arbitration on the Government of India (GoI) in respect of the audit demand raised by DGH based on PSC provisions. The government has accepted it and the arbitration tribunal stands constituted. It is our position that there is no liability arising under the PSC owing to these purported audited exceptions. The audit exceptions do not constitute demand and hence shall be resolved as per the PSC provisions.
The tribunal had a first procedural hearing on 24 October on which Vedanta also filed its application for interim relief. The interim relief application was heard by the tribunal on 15 December 2020, wherein it was directed that the GoI should not take any coercive action to recover the disputed amount of audit exceptions which is in arbitration and that during the arbitration period, the GoI should continue to extend the tenure of the PSC on terms of current extension.
The GoI has challenged the said order before the Delhi High court which is now listed on 20 May 2021.
Further, on 23 September 2020, the GoI filed an application for interim relief before Delhi High Court seeking payment of all disputed dues. The bench has not been inclined to pass any ex-parte orders and the matter is now listed for hearing on 20 May 2021.
Further to above stated letter from GoI on 26 October 2018, in view of pending non-finalisation of the Addendum to PSC, the GoI granted permission to the Oil & Gas business to continue petroleum operations in Rajasthan block, till the execution of the Addendum to PSC or 30 April 2021, whichever is earlier.
Ravva block
The Ravva block produced at an average rate of 19,177 boepd, higher by 35% y-o-y. This was primarily due to new wells bought online through Ravva drilling campaign which was successfully completed during the year.
Cambay block
The Cambay block produced at an average rate of 10,329 boepd, lower by 29% y-o-y. This was primarily due to natural field decline partially offset by production optimisation measures.
PRICES
| Particulars | FY2021 | FY2020 | % change |
|---|---|---|---|
| Average Brent prices –US$/barrel | 44.3 | 60.9 | (27) |
Crude oil price averaged US$44.3 per barrel, compared to US$60.9 per barrel in the previous year driven by multiple reasons shifting the world from the era of supply disruption to plenty. Global economic indicators continued to be adversely impacted due to the COVID-19 pandemic.
Early in the year, oil prices declined drastically as the markets struggled with a rapidly filling storage capacity and massive crude oil glut amid a demand collapse caused by the virus outbreak.
Prices continued extending gains from the second quarter, climbing to a six-month high as physical market fundamentals continued to recover, rollout of COVID-19 vaccines and the surplus in the market eased, which was reflected in the decline in crude oil stocks, and recovery in refinery operations and utilisation rates in the major economies.
Continued efforts by OPEC to accelerate production cuts including voluntary adjustments and weather-related energy crisis in the US later in the year caused a sharp decline in oil production. This temporarily disrupted at least a fifth of the US refining output, and a million barrels of crude production led to a steady rally in crude prices.
FINANCIAL PERFORMANCE
(` crore, unless stated)
| Particulars | FY2021 | FY2020 | % change |
|---|---|---|---|
| Revenue | 7,531 | 12,661 | (41) |
| EBITDA | 3,206 | 7,271 | (56) |
| EBITDA margin | 43% | 57% | - |
Revenue for FY2021 was 41% lower y-o-y at `7,531 crore (after profit petroleum and royalty sharing with the Government of India), owing to fall in oil price realisation and lower volumes. EBITDA of FY2021 was at `3,206 crore, lower by 56% y-o-y in line with the lower revenue.
The Rajasthan operating cost was US$7.7 per barrel in FY2021 compared to US$8.7 per barrel in the previous year, primarily driven by cost optimisation initiatives and lower maintenance activities due to COVID-19 early in the year.
A. Growth projects development
The Oil & Gas business has a robust portfolio of infill development and enhanced oil recovery projects to add volumes in the near term and manage natural field decline. Some of key projects are:
Mangala infill, Bhagyam & Aishwariya Enhanced oil recovery (EOR) and FM3/5 Infill
Mangala is currently under full field polymer injection. In addition, to increase the ultimate oil recovery and support production volumes, we are executing a 45-well infill drilling campaign in Mangala field. Drilling and hook up of the 45 well campaign have been completed during FY2021.
The polymer’s success enhanced oil recovery at Mangala and is being replicated at Bhagyam and Aishwariya fields to increase recovery rates. Drilling and hook-up of 42 well campaign have been completed during fiscal year 2021. Surface facility development for polymer implementation has been completed and polymer injection has been ramped up to its design capacity.
Based on the success of the FM3 infill drilling campaign, Cairn has identified opportunities to further accelerate production by drilling four horizontal wells in FM3 and FM5 sands. The project also entails drilling of few deviated wells for FM2/3 sands and conversion of three wells to polymer injector. The approved field development plan is being executed and the drilling is expected to commence during the first half of the fiscal year 2022.
Tight oil and gas projects
Tight oil: Aishwariya Barmer Hill (ABH)
Aishwariya Barmer Hill (ABH) is the first tight oil project to monetise the Barmer hill potential. All 39 wells have been drilled, of which 27 wells are hooked up. They are being progressively hooked up to ramp up volumes. Surface facility construction is completed and commissioned.
Aishwariya Barmer hill stage II drilling programme enabled to establish the confidence in reservoir understanding of ABH. Based on the success of it, drilling of 5 additional wells were conceptualised and drilling is expected to commence during third quarter of fiscal year 2022.
Tight gas: Raageshwari deep gas (RDG) development
Gas development in the Raageshwari Deep Gas field continues to be a strategic priority. Early production facility has been commissioned and ramped up to its designed capacity of 90 mmscfd.
Further construction of gas terminal through integrated contract is completed and under commissioning. This shall lead to incremental sales of ~100 mmscfd.
In order to realise the full potential of the gas reservoir, drilling of 42 wells is nearing completion. 41 wells have been drilled, of which 23 wells are online as of 31 March 2021. They are being progressively hooked up to ramp up volumes.
Other projects
Surface facility upgradation
The Mangala processing terminal facility upgradation is nearing completion and all the major sub-systems of liquid handling are under operation. Intra-field pipeline augmentation project has been completed. The project will lead to increasing liquid handling capacity by 30% at the Mangala processing terminal.
Ravva development
An integrated development campaign which was commenced in Q3FY20 got completed in FY2021. Seven well drilling programmes resulted in ~11 kboepd of incremental volumes from Ravva Block.
B. Exploration and appraisal
Rajasthan - (BLOCK RJ-ON-90/1)
The Rajasthan portfolio provide access to multiple play types with oil in high permeability reservoirs, tight oil and tight gas. We are evaluating opportunities to drill low to medium risk and medium to high reward exploration wells to build on the resource portfolio.
Tight oil appraisal
The appraisal programme of four fields (Vijaya and Vandana, Mangala Barmer Hill, DP and Shakti) entails the drilling and extended testing of 10 new wells with multi-stage hydraulic fracturing. Till 31 March 2021, 8 wells have been drilled.
Open Acreage Licensing Policy (OALP)
Under the Open Acreage Licensing Policy (OALP), revenue-sharing contracts have been signed for 51 blocks located primarily in established basins, including some optimally close to existing infrastructure.
Full Tensor Gravity Gradiometry™ (FTG) airborne survey implemented to prioritise area of hydrocarbon prospectivity has been completed in Assam, Cambay, Rajasthan and Kutch region. The exploration prospect maturation process is digitalised to fastrack the decision to drill.
The initial phase of seismic acquisition programme has been completed in Assam, Cambay and Offshore GS-GK region. The second phase is ongoing in Rajasthan and Cambay.
Early drilling opportunities have been identified, based on reprocessing and interpretation of vintage data in Rajasthan, Assam and Cambay region. We are planning to utilise modular production facilities Extended Well Test (EWT), Quick Production Facility (QPF) to fastrack production.
The first well KW-2 Udip has been drilled in Rajasthan. Drilling and related preparation activities are ongoing in Cambay and North East.
STRATEGIC PRIORITIES AND OUTLOOK
Vedanta’s Oil & Gas business has a robust portfolio mix comprising exploration prospects spread across basins in India, development projects in the prolific producing blocks and stable operations which generate robust cash flows.
The key priority for us is to deliver on our commitments from our world-class resources with ‘zero harm, zero waste and zero discharge’:
