Getting into the Pipeline Business is a Priority for Oil India

Sunil Kumar Srivastava
Chairman and Managing Director (CMD) of Oil India Ltd (OIL)
In its five decade history, OIL India has been able to achieve a record production, and this has come through its increase in drilling efforts, making use of novel technologies and effective exploration in its areas of operation, says Sunil Kumar Srivastava, Chairman and Managing Director (CMD) of Oil India Ltd (OIL). According to the CMD, the company has a strategy for 'selective diversification', which will be related to the petroleum value chain such as City Gas, LNG, Refinery and Petrochemicals, unconventional hydrocarbons such as CBM, Shale Oil and Gas, Tight Oil and Gas and renewable energy like Wind and Solar.

OIL has ramped up its oil and gas production from 3 MMTPA and 4 MMSCMD to 3.90 MMTPA and over 7 MMSCMD respectively in recent years. What have been the major drivers fuelling this growth?
OIL has been able to achieve this record production in its five decade history through increase in drilling efforts, introduction of innovative technologies like horizontal and J-Bend drilling and effective exploration in its areas of operation. Most of this oil production is from its aging fields in Assam and Arunachal Pradesh. The Company has extensive experience in managing mature oilfields through implementation of suitable IOR/EOR methods. The Company has been consistently making small to medium size discoveries leading to a healthy Reserve Replacement ratio of over 125 per cent. Our 2P reserves as on 01.04.2012 stand at 941 mmboe. Most of the wells drilled in our operational areas are over 3500 m deep and we are now probing deeper in search of hydrocarbons and commercial production from the deep Paleocene Eocene formations. The continuing trend in introduction of cutting edge technology in exploration front such as better imaging of subsurface structures and reservoirs has inevitably added to OIL's confidence to sustain cost effective exploration ventures in upper Assam and other frontier areas ofNorth-East.

What are the key initiatives being taken by OIL to develop natural gas market and monetise your gas produced in the North East?
Several initiatives have been taken by OIL to develop the gas market in the North East. With the commissioning of the Duliajan - Numaligarh gas pipeline in March 2011, OIL has started supply of gas to NRL who are withdrawing around 1.00 MMSCMD of gas for its captive use. OIL had taken proactive steps to ensure that this gas pipeline was constructed and commissioned in time. OIL had also extended the use of its right-of way for laying of the pipeline without which the laying of the line would not have been possible. It is also planned to extend the Duliajan-Numaligarh pipeline in future to Guwahati for making natural gas available to this region and along the corridor. Market survey to ascertain demand for natural gas in Guwahati and in other towns enroute has been completed. OIL has also committed supply of 1.35 MMSCMD of gas to BCPL, the Assam Gas Cracker at Lepetketa once the cracker comes on stream in 2012-13.
OIL has now initiated steps to explore for more customers in Assamand Arunachal Pradesh to monetise its gas potential.

What is the potential that you see in CBM? OIL has entered into a consortium to explore the opportunities in CBM. Could you tell us something about it?
CBM has a lot of potential. Having the 3rd largest proven coal reser ves, India's CBM reserves are estimated to be 4.6 trillion cubic metres (TCM), which is big. One block belonging to Great Eastern Energy Corporation Limited has already commenced commercial production.
It was only after the formulation of the CBM policy for Exploration and Production(E & P) by the Government in July 1997, CBM exploration activity commenced in the country. In the fourth round of CBM OIL has won a block in consortium with DART Energy who will operate the block. OIL has 40 per cent par ticipating interest in the block. The block (AS-CBM-2008/IV) is in Assam with an area of 113 Sq km. Statutory approvals are being taken by the operator for grant of PEL and Core hole drilling in Phase I exploration. We plan to drill the pilot/Test well in 2012 under the Phase I of the work programme.

Deep-water E & P activities in India are now accelerating, what is the expertise of Oil India in deep-water?
The saga of exploration for hydrocarbons in offshore areas of India started in '60s and discovery of giant Mumbai High oil field in 1974 gave a big boost to exploration activities, particularly in the offshore areas. Subsequent to this, although the efforts of various E & P companies led to a number of small discoveries, for nearly three decades, India had not witnessed any big success like Mumbai High until recently when a number of significant discoveries have been made in offshore east coast.
India has extensive experience of over three decades in shallow offshore exploration, development, production and transpor tation of crude oil and natural gas, where the technologies have been time tested. In the deep water environment, it is fairly new. Within 2-3 years of starting deep water exploration, in the east coast important gas discoveries were made by RIL, GSPC and ONGC, in addition to number of oil/gas discoveries made by Cairn Energy in the Krishna-Godavari basin. Results of exploration of several other blocks are yet to come. A lot of exploration is required to be done, a host of technologies will need to be used, tested and perfected to suite the need of different environments and fields.
Oil India Limited did some offshore work in Mahanadi, East Coast and Andamans in the 1980s but did not meet with any commercial success. However we have now acquired some deepwater blocks as operator in the last NELP round. We are confident that we will prove ourselves in these offshore blocks also.

Oil India has been a pioneer in Pipeline Transportation in India. Does the country need more pipeline infrastructure?
Pipelines are lifelines in the energy sector. Transportation of oil and gas through pipelines forms an important midstream activity which is environment friendly and convenient. Bringing oil and gas to the markets from remote producing areas is a challenge. Pipeline network criss-crossing the country is needed so that petroleum can be transported to every corner of the country. Getting into the pipeline business is a priority for Oil India. There have been various instances when we have taken part in bidding locally and internationally to design, build, operate and maintain new pipeline systems. We have strong competence and expertise within the company, but until now I donít think we have marketed this very well. Forty years ago Oil India built a 1,157-kilometre-long pipeline from the Assam fields all the way to Barauni Refinery in Bihar, which was a fantastic achievement.
We have already worked as part of an international consortium in Sudan to complete a pipeline project. We are keen to participate in the proposed pipeline projects for transportation of gas, petroleum products etc in the country either alone or in partnership. We are also starting dialogues with some key players in neighbouring countries like Bangladesh to see if we can get into opportunities there. In 2009 we also built and commissioned a 660 kilometre long product pipeline.
One of the refineries viz Numaligarh Refinery in Assam, to which we have been supplying crude, did not have much demand for petroleum products in the immediate area. We realised that there was enough space in our ROW to lay a product pipeline alongside our existing trunk crude oil pipeline to take the petroleum products from the refinery to the market. This was indeed a win -win situation for all concerned. We provide the O & M services to the product pipeline.

Does Oil India have plans for diversification? What will be your strategy for diversification?
While we would like to stick to our core competence in E & P, selective segments of energy value chain and long distance oil and gas pipelines, we have a strategy for 'selective diversification'. However, these diversifications will be related to the petroleum value chain such as City Gas, LNG, Refinery and Petrochemicals, unconventional hydrocarbons such as CBM, Shale Oil and Gas, Tight Oil and Gas and renewable energy like Wind and Solar. We have already established a Wind Power Project of 13.6 Mw in Rajasthan. We have also entered into Shale Oil and Gas by acquiring a 20 percent stake in Carrizo Oil and Gas Inc's liquid rich shale assets in the Niobrara basin in Colorado, USA through our wholly owned US subsidiary.
Apart from the 26 per cent stake in Numaligarh refinery, Oil India has also picked up 10 percent stake in the Brahmaputra Cracker and Petrochemicals, which is scheduled to go on-stream in 2013. Similarly, the company has tied up with BPCL, Gail and ONGC apart from Indian Oil to participate in bidding for the city gas distribution business. We also have a 45000 TPA plant to produce LPG, which we sell to Indian Oil. An earlier idea of petro-product retailing was dropped due to the problem of under-recoveries.
In gas transpor tation, we can extend our Duliajan-Numaligarh pipeline to Guwahati and beyond as we already have the right-of-way, thanks to our existing trunk crude oil pipeline. We have also done a survey on market potential and anchor customers on this route. We are also looking for certain opportunities in Bangladesh in pipeline business. In non -conventional energy, we are readying ourselves for the bidding rounds for shale gas that the government is planning for. We are seriously looking into participating in LNG business also.

Can you tell us something about your Global Business?
Since 2005, the Company has also stepped out to acquire E & P assets, both exploration as well as discovered in eight countries through competitive bidding. OIL has been on the lookout for producing assets overseas and the first oppor tunity which came its way was in Venezuela, when in consortium with other international and national companies the international consortium won the bid to develop a discovered field in the Orinoco belt in Venezuela. We expect oil production from this asset sometime in 2013.
We have exploration assets in Libya, Gabon, Iran, Yemen, Egypt, Timor Leste and Nigeria also. Work in most of the blocks in these countries is in progress. We are operators in a block in Gabon where we hope to spud our first well in October, 2012.
In order to bring about a more structured approach to its acquisition initiatives, the Company has drawn up an overseas acquisition strategy with the help of an international consultancy firm. The strategy mandates OIL to currently focus on acquisition of discovered/producing assets that can be monetised in a short span of time, in preference to exploratory assets. Strategically a few global geographical regions have been identified for such acquisition initiatives.
In the last year consistent and focused efforts were made to acquire a producing property or a Company with producing assets without much success. One reason for this was that being a PSU, the management has very little flexibility for negotiation of the asset value. Not withstanding this, a foundation has been laid where a number of assets have been identified and due diligence is in progress or negotiations are in an advanced stage for acquisition of properties both conventional oil and gas as well as unconventional oil and gas in selected parts of the globe.
Oil India very recently along with Indian Oil Corporation has jointly acquired stake in Carrizo Oil and Gas Inc's shale assets in the Niobrara basin, in Colorado, USA. This is our first shale acquisition in the USA. This acquisition will also help us gain experience in the technology and operations of shale/tight oil fields and use its findings to implement the same in India.