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  1. CAIRN INDIA Energy Security – Oil is Well 19 January 2010

  2. What is a Cairn? A Cairn is a collection of stones marking the way to the top of a Scottish mountain or hill. The placing of a stone on the Cairn serves dual purpose; it marks the path for others to reach the top and it also records the achievement of the individual. Each stone becomes integral to the structure and strength of the Cairn which continuously evolves and expands. The Group’s name originated from this vision.

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  4. Energy consumption in India Primary energy fuel mix (2008) Comparison of primary energy consumption Source: BP Statistical Review, 2009 India is one of the fastest growing economies of the world : GDP growth - ~6% CAGR (1995 to 2009) Primary energy consumption growth in India over last two decades: ~5% (CAGR) VS ~2% World India produces 36.1 MMT of crude but consumes 135 MMT - high consumption but low domestic resources - greater import dependence! Balanced coal supply / demand vs. skewed oil supply / demand

  5. India – growing refining hub

  6. International Market • Crude & products are traded across the world and certain regions have emerged as pricing hubs with their representative pricing indices • Western Texas Intermediate (WTI) in the US • Brent North Sea Europe • Arab Gulf Middle East • Prices from these hubs are often utilised as independent indices • Though prices in these hubs move hand-in-hand there are also affected by • Crude specifications • Heavy crude oils (containing wax) are priced lower as compared to lighter crude • Sour crude (containing Sulphur) is priced lower as compared to sweet crude • Regional demand – supply conditions and other dynamics As India becomes a refinery hub and a major consumption centre, international oil prices would play a more prominent role

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  8. What is energy security? Energy security is essentially encapsulated in the following 3 elements – Availability Availability on demand, when a country wants energy, it should be available The nation should be able to access energy sources globally to ensure uninterrupted growth Accessibility Affordability of the energy being procured to ensure that the growth engine is not impacted by the price impact Affordability While rich countries are able to find willing sellers, the issue of energy security gains importance for developing countries which have invested billions of dollars in infrastructure but still face issues in securing energy at high costs. India has moved in steps – create refining capacity to refine crude - create infrastructure to improve market access – securitize supply of crude

  9. Some of the market distortions • Geographic distribution of resources • In the case of oil and gas, the top 10 countries account for over 70%. • In fact, in natural gas, the top 5 countries account for close to 60%. • Indian economy shows high level of geographic concentration (>50% from Middle east) in the import of the energy requirements • Who owns the resources ? • Twenty five years ago, nearly 80% of the reserves were with International Oil Companies (IOCs), which invested heavily in technology and production • Today, the ratio is just the reverse with 80% of the resources being owned by the respective countries and only 20% under the control of IOCs Striking the right balance would help increase productivity

  10. Need for the country to act NOW – import dependence to grow to more than 90% by 2030 • India's oil import bill has grown tremendously with a strong growth in the Indian economy (total crude oil import grew from 74.09 million tonne at a total cost of $ 12.9 billion in 2000-2001 to 124 million tonne at the cost of US$ 77 billion in 2008-2009. In addition, the government incurred a subsidy of US$18 billion on supply of petroleum products in the country) • To deliver a sustained growth rate of 8% through 2031-32, India needs to • increase its primary energy supply by 3 to 4 times and, • its electricity generation capacity/supply by 5 to 6 times of their present levels - increase to nearly 800,000 MW from the current capacity of around 160,000 MW inclusive of all captive plants • the requirement of coal to expand to over 2 billion tonnes/annum based on domestic quality of coal • The International Energy Outlook (IEO) has projected that India will consume over 5 million barrels of oil a day by 2030; more than double its current consumption. • As per investment projections, India requires $120 to $150 billion in the energy sector in the course of the next five years.

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  12. Steps to achieve energy security • Actions to improve energy security can be classified broadly into two groups, one that reduces risks and another that deals with the risks after they occur. The major policy options are: • Reducing Risks • Reduce the requirement of energy by increasing efficiency in production and use of energy – Govt. plans of introducing CFLs in the market; • Look at global sources to stake equity – OVL pursuits in Africa, Russia, etc. • Alternate energy • Dealing with Risks • Strategic storage • Infrastructure • Technology • Having resources in place • Other risks • Supply risks from domestic sources, such as from a strike in coal mines or the Railways need to be addressed • Even if there is no disruption of supply, there can be the market risk of a sudden increase in energy price. • Even when the country has adequate energy resources, technical failures may disrupt the supply of energy to some people

  13. Price Risk Management • The movement in crude prices has significant impact on the India economy • Close to 117 million barrels of oil gets traded every day and less than 15% of that is actually accounted for by the producer and the seller both together – denotes significant presence of funds and financial players. • Managing these risks is possible with alternatives and required for producers, refineries and consumers • Crude prices have moved to a USD 50+ per bbl level and the risk of high crude prices is now more imminent than before.

  14. Strengthening relationships • India’s dependence on energy imports have also led to shift in the geopolitics of energy in the region, leading to a possibility of the nation exerting greater influence on oil exporting economies. • Ensure safe passage in the region for sustained trade flows • India’s has invested in strengthening its naval fleet to secure its energy sea lanes to the Gulf regions. • India has entered into defense pacts with a number of nations in the Middle East • In recent past deployed warships in the Gulf of Aden in late 2008 to protect Indian commercial shipping from pirates operating off the coast of Somalia. • Advantage of trading this off for some concessions / preferences over resources in the neighbouring countries

  15. To summarise – Energy Security is achievable with focused efforts! Energy requirements of the country Policy directives on all fronts – difficult and complex but possible with persistence!

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  17. Cairn India – A Journey of Growth • An Indian Energy Company • Listed on BSE & NSE • Part of NIFTY index • Over 250,000 Indian retail shareholders Sustainability & Growth • World class resource base – >1bn bbls reserves + resources and growing • $4.5bn Rajasthan development including pipeline to Gujarat coast • Ravva – >200mmbbls produced; >50% ultimate recovery; $4bn to GOI Exploration Success • Discovered Lakshmi, Gauri • Annapurna – India’s First deep-water discovery in KG basin • Mangala – Largest onshore discovery in India since 1985 Development Success • Ravva Redevelopment • 3,500 to 50,000 bopd in 26 months *Market Cap of Cairn Energy PLC end 1999 **Market Cap as of 18 January 2010

  18. Existing Operations • Total 11 blocks • 2 Production Blocks • Gross operated production 60,480 boepd (net to Cairn 18,638 boepd) * • (Ravva, Cambay & RJ) • 1 Production & Development Block • Rajasthan block under development – Mangala (commenced production in Aug’09), Bhagyam and Aishwariya fields(MBA) • 22 other discoveries • 8 Exploration Blocks • 4 operated – 3 in India and 1 in Sri Lanka • 4 non-operated *Q2 FY 2009-10 Provisional award of KG-OSN-2009/3 and MB-DWN-2009/1 blocks in NELP VIII bidding round; subject to GoI approval

  19. Energy for India Queries to: Karunakaran Hari - GM (International Trade) Mobile: +919650698289 Email: karunkaran.hari@cairnindia.com