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23/12/11

RavvaCelebrating 16 Years of Technical

ExcellencePioneering Development | History & Vision

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23/12/11

RAVVA – Celebrating 16 years of Technical ExcellencePioneering Development

History and Vision

At the time of independence, India’s domestic oil production was a mere 250,000 tonnes perannum. That amount came from Assam, the sole oil producing state in India.

Foreign companies entered the Indian exploration & production scene in the early fifties but theirpresence was not very significant in Asia. By the start of the 1990s, oil and gas majors haddrilled more than 12,000 wells in Asia but only 12 in India. Most foreign experts were writing offIndia as a place to discover new petroleum reserves.

As part of its liberalisation initiatives in the early 1990s, the Government of India (GoI) broughtthe Petroleum Sector Reforms (PSR) to actively encourage the participation of foreign oil andgas majors. The aim was to facilitate private investment in the sector, introduce state of the arttechnology and bolster the dwindling foreign exchange reserves of the country.

The GoI developed the International Competitive Bidding (ICB) policy to identify those privateentities who would be allowed the rights to develop specific blocks. These block were oneswhich the National Oil Companies had found to be subeconomic under the prevailing pricingpolicies and investment requirements.

The policy required a competent foreign operator but allowed Indian companies with or withoutprevious experience in E & P activities also to bid. The National Oil Companies were required tohave a minimum 25% to 40% participating interest from day one.

Until the PSR, the three earlier rounds of exploration bidding had yielded no explorationsuccesses, though only foreign companies were allowed to bid. The blocks identified under theICB policy were:

Panna-Mukta & Tapti (Mumbai offshore)Ravva (Andhra Pradesh offshore)Baghawala (Rajasthan)The interested parties were exploration and production (E&P) players like

Petronas, BHP,HOEC, CNPC, and industrial houses like Tatas and Videocon.

The Ravva block, situated off the coast of Andhra Pradesh, was estimated to produce ~101million barrels of crude oil and would have required an investment of around USD 450 million todevelop. Videocon originally bid for the Ravva block but in order to meet the GoI requirement foran operator with experience in E&P operations, Command Petroleum from Australia wasbrought in. The unincorporated joint venture (UJV) comprising of ONGC (40%), Videocon (30%)and Command Petroleum (30%) submitted the bid.

After the bidding and protracted negotiations, the UJV won the Ravva block and the ProductionSharing Contract (PSC) was signed in 1994. The UJV took over the existing assets and facilitiesfrom ONGC and within a short span of 18 months increased the production from 3,500 bopd to35,000 bopd.

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23/12/11

RAVVA – Celebrating 16 years of Technical ExcellencePioneering Development

In 1996, Cairn Energy PLC acquired Command Petroleum and became the operator of theRavva block.Ravva was a strategic fit for Cairn, as the company wanted to increase its presence in SouthAsia.

Cairn’s investment to acquire Command Petroleum proved to be a sound investment decisionand paved the way for future growth in the country. The field also added a development successstory to Cairn’s exploration portfolio.The initial vision was to develop Ravva as a model oil and gas field in India. As the Ravva JVpioneered development of the Ravva field, the focus was on minimising costs and maintainingvolumes through the application of innovative processes and new technology.Ravva has evolved into one of the lowest cost fields globally, profitable even when oil pricesranged from USD 9 to 12 per barrel.

Over the years, the Ravva JV has produced more than 220 million barrels from Ravva. The GoIhas earned revenues on account of profit petroleum of approximately USD 4 billion (Rs.16,000crore). This stands at the peak rate of 60 per cent and will continue until the end of the PSCterm.

Ravva pioneered many operational firsts in India, such as private helicopter licenses, anoffshore loading point for crude sales, a helibase at S.Yanam, the US Dollar to Indian Rupeeconversion of sales tax, and invoicing in dollars for a product produced in India. The Ravva JVworked closely with the Government to secure various approvals and develop the block in atimely manner.

The Ravva JV’s focus continues to be keeping the costs to a minimum while maintaining steadyvolumes.The Ravva block still holds potential and with the aid of innovative technologies, the Ravva JV’saim is to leverage and extend its prospects over the PSC term until 2019.