Oil and gas exploration, and production life cycle

Oil and gas exploration, and production life cycle

Cairn looks to create, add and realise value for stakeholders, but not at the expense of the safety and well-being of people and the environment. We manage the risks associated with our business responsibly for all our activities and wherever we operate. This means, we aim to behave professionally in our dealings with people and within the environment from the very start of any project or activity.

The oil and gas business is, by nature, long-term and our approach covers every stage of the oil and gas life-cycle and is outlined below.

1. Due diligence

Before making an acquisition or investment, applying for an exploration licence or farming-in to an existing project, Cairn carries out an extensive risk-screening process which includes assessing whether there are potential health and safety, social, human rights, political, corruption, security or environmental impacts. This is used in decision-making on whether or not to proceed and if investment goes ahead it informs approaches to risk management going forward.

In 2014 we conducted due diligence on farm-in opportunities including the Mesana blocks in Spain.  We farmed-in to the PL420 block and drilling project operated by Statoil in the Norwegian sector of the North Sea. We also farmed out of UK sector blocks P2040 and P2086, reducing our interests south of Catcher.

2. Prequalification

When we apply for an exploration licence, the necessary documents are submitted to the relevant authorities. Typically this includes information about our legal status, financial capability, technical competence and plans to manage health, safety and environmental risks, and contributions to local economic development.

In 2014 Cairn participated in the 23^rd licensing round in the Barents Sea, Norway.

3. Exploration seismic

Once Cairn has been awarded the right to explore in a certain area, we may carry out seismic surveys to develop a picture of geological structures below the surface. This helps identify the likelihood of an area containing hydrocarbons. Seismic surveys are usually preceded by an assessment of environmental, social and human rights impacts, which are managed through the Project Delivery Process (PDP).

During 2014 Cairn successfully completed seismic surveys offshore the Republic of Ireland and Malta. As non-operator, we also participated in seismic operations offshore Western Sahara.  Application for seismic surveys is pending offshore the Gulf of Valencia.

4. Site survey

Before commencing any drilling activity, site surveys are carried out to gain more detailed information on the area where an exploration well may be drilled, and to confirm that the selected drilling location is safe and that any sensitive environments can be avoided.

The process normally involves taking geological samples from the seabed and carrying out shallow seismic surveys. These activities have low social and environmental impacts and therefore usually do not require a separate Environmental Impact Assessment (EIA) or Social Impact Assessment (SIA).

Pre- and post-drilling surveys were completed for wells offshore Senegal and following drilling offshore Morocco.

5. Exploration drilling

Exploration wells are drilled to determine whether oil or gas is present. This phase can be accompanied by a step-change in activity and visibility to local people as offshore exploration can involve a drilling rig, supply vessels and helicopters for transporting personnel.

Exploration drilling is preceded by an assessment to understand potential health, safety, environmental, social, security and human rights impacts. These assessments identify appropriate steps to reduce impacts, manage risks and assist in operating responsibly. Limited community development programmes may also be put into place at this time depending on the nature of the programme.

In 2014 we continued our exploration drilling campaign offshore Morocco, and initiated and completed an exploration drilling campaign offshore Senegal. We were also involved, as non-operator, in exploration drilling in the UK and Norwegian North Sea. Drilling in the Cap Boujdour block, offshore Western Sahara, commenced in December 2014.

6. Appraisal drilling

If promising amounts of oil and gas are confirmed during the exploration phase, field appraisal is used to establish the size and characteristics of the discovery and to provide technical information to determine the optimum method for recovery of the oil and gas. The potential social and environmental impacts associated with appraisal drilling are comparable to exploration drilling, and similar assessments are carried out in advance.

Due to the delay in refurbishment of the Blackford Dolphin rig, the proposed Spanish Point appraisal well, offshore Republic of Ireland, could not be drilled in 2014 during the safe weather window and was therefore postponed. Plans are well advanced to drill this well, subject to the necessary approvals.  Preparation for anticipated appraisal drilling in Senegal is also underway.

7. Development

If appraisal wells show technically and commercially viable quantities of oil and gas, a development plan is prepared and submitted to the relevant authorities for approval. This includes a rigorous assessment of all the potential risks and a long-term assessment of environmental and social impacts covering a timeframe of between 10 and 30 years. The plan will also detail projected benefits to local communities, for example employment and supplier opportunities, as well as proposing how to manage potential impacts such as an influx of workers from outside the local community. At this stage good design is important to remove and mitigate risks to an acceptable level as well as managing construction and installation in a manner to likewise minimise impacts.

We are participating as non-operator in two development projects, the Kraken and Catcher fields, in the UK North Sea.

8. Production

A variety of options are available for the production of oil and gas. During this phase, which can last many decades, regular reviews are made of social and environmental performance to ensure that impacts identified in the assessments are mitigated. Changes in the risks associated with activities are assessed throughout the production period. Safe operations remain an ongoing requirement at this stage, which means personnel are competent and good HSE behaviours are in place and equipment is properly maintained and operated.

We currently have no operated production, but historically had significant production through our Indian business, Cairn India Limited (CIL), which we subsequently exited. Our involvement in exploration, and latterly production in India, brought social and economic development to a number of regions.

We anticipate production from our non-operated Catcher and Kraken fields from 2016/2017.

9. Decommissioning

This phase occurs when hydrocarbons can no longer be extracted safely or economically at the end of any field life-cycle. Decommissioning consists of closing operations in a manner that protects people and the environment and to avoid unacceptable legacy issues for local stakeholders and the Company. We are not engaged in any decommissioning activities at this time.

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