Good Morning Ladies
and Gentlemen,
On behalf of the Board
of Directors, I am delighted to welcome you all to the Tenth Annual General
Meeting of your Company.
The oil and gas sector
plays a pivotal role in global growth due to its strong economic linkages.
The oil and gas
industry is navigating a tough phase. Excess oil supplies have taken the
inventory levels to a historic high, even though strong oil demand has
persisted.
The oil exporting
economies have seen dwindling profits from oil production, even as the oil
importing economies are benefiting from lower energy costs.
India, as one of the
largest oil importers, witnessed lower trade and current account deficits,
reduced inflation and lower subsidy bill.
India has shown
remarkable resilience and remains progressive. As per IMF’s latest World
Economic Outlook, India is a bright spot with strong growth and rising real
incomes.
Cairn India for an
energy secure nation
India’s crude oil
import bill reduced from US$ 113 billion in FY 2015 to US$ 64 billion in FY
2016, a reduction of 43%.
It is important that
as a country, we do not take this reduction for granted, because all
projections indicate an increasing dependence on oil and gas imports. As per
the IEA’s World Energy Outlook, by the year 2040, 91% of India’s demand for oil
and 49% demand for gas would be met by imports. This high dependence would
entail significant cost to the economy.
Thus, every effort
should be made to enhance domestic hydrocarbon production.
In this context, it is
heartening to see the government introduce various policy reforms, which will
attract investments and encourage the domestic oil and gas sector.
We are confident that
the government will continue this momentum and in the next phase of reforms,
introduce policy measures to facilitate existing producers to increase domestic
hydrocarbon production.
As the
largest private crude oil producer in India, your Company assumes a
very significant and responsible role in reducing India’s import dependence.
Your Company operates
over 27% of domestic crude oil production. During the year, Cairn India’s
operations helped reduce India’s import bill by over Rs 21,000 Crore and its
gross contribution to the government exchequer was over Rs 10,000 Crore.
With this larger
context, let me now talk about your Company’s performance.
During the year,
despite one of the lowest oil price scenario, your Company successfully
delivered key projects. This will support medium and long term production. Your
company continues to be in a strong position to growth further.
Assets
The Rajasthan block, a
world class asset has significant national importance. It has
considerably helped reduce country’s crude oil imports.
Cairn India’s success,
over the years, has been reinforced by innovative application of technology.
This DNA has enabled early adoption of technology including Enhanced Oil
Recovery in the Rajasthan field.
One of the world’s
largest polymer flood projects at Mangala, continued to yield positive results.
The project contributed an average of 14,000 barrels of oil equivalent per day,
during FY2016.
Excellent performance
by Mangala EOR and encouraging upside from Aishwariya infill programme augur
well for the Rajasthan block. I am happy to share that Mangala EOR performance
reaffirms the potential of the Rajasthan block.
Our continued efforts
have improved the viability of polymer flood in Bhagyam and Aishwariya as the
development and operating cost per barrel is reduced by 25-30%. The Field
Development Plan for Aishwariya EOR is proposed to be submitted in the current
quarter and the revised FDP for Bhagyam EOR is expected to be submitted to our
JV partner, in 1H 2017.
With a large
exploration potential, Barmer Hill offers an excellent growth opportunity.
Development of Aishwariya Barmer Hill is envisaged in stages, and production
from Stage 1 is expected to commence, in the current fiscal.
To finalise the
development plan for Mangala Barmer Hill, Appraisal, Internal Studies and Field
Pilots are being
carried out.
During the year, your
Company commissioned the Salaya Bhogat Pipeline storage terminal & marine
export facilities at Bhogat. This is a significant first step towards accessing
larger market as it allows us to ship out crude oil from the Rajasthan Block to
refineries, across the country.
A continual
enhancement in productivity has been one of the key factors for the resilience
of U.S. production during historic low oil prices.
I am happy to share
that your company, in line with the current global practices, has also achieved
notable improvements in productivity, which will aid future growth.
For example, the
expected ultimate recovery from the Raageshwari Deep Gas field has been
upgraded by over 25%. This was a result of successful application of hydro frac
technology and better reservoir management. With this, your company
successfully placed the largest frac in India.
India is gradually
moving to a gas based economy, where-in, gas will play an increasingly
important role, in the overall energy mix.
Your company is
leveraging gas potential of the Rajasthan block, which is important for future
growth. We envisage multiplying our gas production by four times, which will
support resource maximization from the block.
Ravva and Cambay, our
offshore blocks are excellent examples of innovative reservoir management and
production optimisation practices. They are delivering best-in-class recovery
that is far greater than the initial resource estimates.
Your company’s
success, over the years, was achieved by focussing on adoption and innovative
application of technologies. For example, EOR, Hydraulic Fracturing and
state-of-the art seismic imaging are leading to enhanced hydrocarbon recovery.
Together with greater focus on productivity, we are well placed to maximize the
resource potential.
Adapting to new
environment, leading to free cash flow and planned dividend
In the low oil price
environment, our focus was to make the organisation adapt to a new way of
working. This was achieved through a multi-pronged focus on optimising costs,
building talent and capabilities from within, and keeping employees focussed on
goals and priorities of the organisation.
This has enabled free
cash flow generation of over US$ 637 million and a robust cash balance.
I am happy to share
that despite a steep drop in crude oil prices, your company adhered to its
stated dividend policy. The dividend pay-out amounts to 31.6% of Cairn India’s
annual consolidated normalized net profit.
Health, Safety,
Environment and Community Engagement
Your company is
committed to sustainable development that involves integrating economic health,
safety and environmental aspects into our business decisions.
Safety is
non-negotiable at Cairn. Continuous drive to operate safely and responsibly,
sets your company apart. This relentless focus has helped build an excellent
safety record over the years. For instance, we have clocked more than 70
million LTI free man-hours, last year. We ensure a safe working environment for
all, by upholding the highest international standards.
Your company’s focus
on shared prosperity through empowerment and development enables us to forge a
lasting relationship with the communities.
We continued our
contribution to the social and economic progress in education, health,
livelihood, water & sanitation.
Our strategic
investments are aligned with country’s social goals, thereby enabling us to
positively impact around one million people.
Our efforts to bring a
holistic development of the local communities were recognised when your company
received the CII-ITC Sustainability Award for ‘Excellence in CSR’.
Merger
Your Company continues
to work towards completion of merger with Vedanta. The merger would generate
value for the shareholders and de-risk your company.
Your company will get
access to Vedanta’s tier-one metal and mining assets, which are well-invested,
low cost and have a long life.
The Path Ahead
Over the years, Cairn
India has delivered through its targeted investments, consistent focus on
efficiency, execution and reliability.
Thus, going forward,
despite one of the toughest operating conditions and uncertain economic
environment, your company is in a strong position to deliver on key projects.
We will continue to
invest in our existing assets to increase production and maximize economic
recovery.
I remain confident
that your company will play a pivotal role in India’s quest for energy security.
The key enablers for
our growth would be our strength in ‘execution’, technology along with a strong
balance sheet.
Your company is well
placed to expeditiously ramp up production and thus deliver enduring,
sustainable shareholder value.
Now I would like thank
Mayank Ashar for his commitment and contributions. I wish him every success in
his future endeavours.
We greatly value the
support of the Government of India, State governments, ONGC, joint venture and
other business partners and local communities for their collaborative and
enduring relationship.
Our world class talent
pool is helping us achieve our business goals successfully. On behalf of the
entire Board, I deeply appreciate all our employees for their resilience and
continued support.
I also take this
opportunity to thank my Board colleagues for their valuable guidance and active
support.
Finally, on behalf of
the Board of Directors and the employees of your company, I would like to thank
YOU, our shareholders for your enduring support.
