Desert Fox
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Image: Cairn Energy
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GEARING UP: With six blocks, Greenlands is one of the biggest bets for Crain Energy
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ew contrasts could be starker than the sandy, brown landscape of the Thar dotted with camels and chinkaras, when juxtaposed against the cold, white expanse of western Greenland where surface transport is still largely by husky sledges. The two regions have little in common, but not for Mike ‘Sniffer’ Watts.
In the oil industry, they don’t call him ‘Sniffer’ Watts without reason. The 53-year-old exploration chief of Cairn Energy and his team discovered black gold deep inside the desert sands of Barmer in Rajasthan, when few were willing to explore the region. Till 2003, Rajasthan had hardly been explored. In fact, Cairn had bought the block that now contains Mangala and 16 other oil fields from Shell for a paltry $7 million. Today, with over a billion barrels of proven reserves, the field in Barmer is the country’s biggest find in over two decades and is among the top 100 fields in the world.
Thanks to the discoveries in India, Cairn moved from being a small Scottish oil explorer to become one of the most valuable oil and gas companies in the UK. And Watts and Bill Gammel, the chairman of Cairn Energy, are now using the success and credibility earned in Rajasthan as a springboard to bid for bigger projects that would have earlier been out of its purview.
“We have built a tremendous knowledge and expertise of developing oil fields in Rajasthan and this is transferable to other parts of the world,” says Watts.
That’s how he landed in Greenland last year and is now shooting seismics in the icy basins of the Subarctic. It’s one helluva bet. Gammel has already been quoted in The Scotsman saying that Greenland could offer a structure that is five or ten times bigger than Mangala.
But like all frontier exploration forays, it carries enormous risks. Environmental groups are closely monitoring the oil industry’s activities in the Arctic. The ice caps are melting and there is fear that drilling could hasten the process.
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Image: Cairn Energy
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In the oil industry, they don’t call him ‘Sniffer’ Watts without reason | |
The Gammel-Watts duo is, of course, taking care to carry the local Greenlanders with them. Community meetings have been organised to address any concerns. Simultaneously, in the last two years, building on their lessons from Rajasthan, they’ve gradually put in place all the critical elements.
One, they’ve created Capricorn, named after Bill Gammel’s sun sign, as a separate exploration arm. (Industry talk suggests that Gammel delayed Capricorn’s listing because of a potential upside of the Greenland asset). As Capricorn’s CEO, Watts will lead the Greenland exploration drive.
Two, a part of the Rs. 29,200 crore that is estimated to flow from the fields in Rajasthan till production plateaus in 2014 will be spent on exploration in areas like Greenland and possibly oil-fields in strife-torn Iraq. By August, Capricorn will be ready with its drilling programme. This March, Cairn Energy raised about $160 million by placing 5 percent of its equity with institutional investors. The funds will be used in Rajasthan as well as to accelerate exploration in Greenland.
Three, in Rajasthan, there were moments when things looked hopeless. The company had to keep the faith even after drilling 15 wells without any viable oil find. “It was sometimes difficult to convince our colleagues on the board on why we had to go on, when there is little to show for the drilling. But we learned one thing from our Rajasthan experience: You’ve got to have staying power when you are convinced about the geology of a region,” says Watts.
Watts began his career with Big Oil when he joined Shell in 1980. But for high-risk, early stage exploration, Cairn has little in common with firms like Exxon, Shell and Chevron. It looks for less-explored geological arenas. “Rewards are lower in discovered areas, because we are left looking for crumbs that others may have missed. Early entrants, on the other hand, are often successful,” says Watts.
However, in a shrinking world, unexplored terrains are difficult to find.
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An interesting piece. Meetings with the local community are the right thing to do. Hope these meetings are constructive and that the local populace is not at all adversely affected by the mining developments.
Best,
Lubna
