Cairn India rejigs holding structure

Cairn India (CIL), the operator of the biggest onshore oil and gas production facility in the country, has started exploring its sole exploration block in Sri Lanka. The company said it was reorganising its holding structure in India — primarily folding some of its assets from its overseas subsidiaries into itself.

The company said early indications from the seismic studies in its Sri Lankan offshore block have been encouraging. As a result, it started the in-depth, three-dimensional seismic study on Thursday of its ‘2007-01-001’ block in the Gulf of Mannar, between Tamil Nadu and Sri Lanka. The 3D study of the block, held through a wholly-owned subsidiary, will be completed by April, process of data will be done by November and drilling will start in April 2010.

It said some of the patterns identified from the preliminary studies have shown similarity to those found in Cauvery basin, a site where hydrocarbon deposits have been confirmed. The area of the block is 3000 sq km in deep water ranging from 400 metres in the east to about 1900 metres towards the west.

“While there are no well drilled in the block, a sparse 7km x 15km 2D seismic grid data was available. These data have been interpreted, based on which some possibilities of hydrocarbon plays have been recognised, using the analogy of the contiguous Cauvery basin. Several leads have been identified based on this regional 2D seismic interpretation,” the company said in a statement.

“While there are no guarantees of success when exploring a frontier area such as the Mannar Basin, the block is under-explored and we are encouraged by the studies we have conducted to date,” it said.

The company’s parent, Scotland-based Cairn Energy, recently announced that it will not spin off its exploration subsidiary Capricorn Energy as it was found to be in the “best interests of the shareholders to retain Capricorn (and the potential upside presented by the new acreage in Greenland) as part of the Group.”

As a result, earlier this month, it bought back the 10% interest it had sold in Capricorn to the Dutch group SHV two years ago.

Capricorn and Cairn India are the two primary asset-holding companies of Cairn Energy. While Cairn India has mostly confined itself to Indian assets, Capricorn, too, has some assets in the Himalayan region, besides other parts of the world, including Bangladesh and Nepal. The company has increasingly hinted that its next big find, after Rajasthan, is likely to come from Capricorn’s Greenland blocks.

Capricorn has carried out a pre-exploration programme in Greenland and also sold a minority interest in them to Malaysian oil firm Petronas. Greenland is seen by some as having great potential for holding hydrocarbon reserves, partly due to the unexplored nature of the island.

While the Indian reorganisation, subject to Court approval, is likely to be part of the overall shift in strategy towards streamlining the holding structure of Capricorn, the company merely said it is aimed at “significantly improving administrative efficiencies.” The assets held by Cairn Energy India Pty Ltd, Cairn Energy India West B V, Cairn Energy Cambay B V and Cairn Energy Gujarat B V are being merged into Cairn India Ltd.
“Cairn India’s interests in various Indian oil & gas businesses are currently held through various foreign subsidiaries and this Scheme of Arrangement will involve demerger of certain of these businesses into CIL. After the implementation of this scheme of arrangement. CIL will own these interests and businesses directly,” the firm said.