Page last updated at 11:29 GMT, Saturday, 29 August 2009 12:29 UK

Cairn turns tap on Indian oil well

Manmohan Singh and Sir Bill Gammell
Indian Prime Minister Manmohan Singh turns the wheel to open a valve at the Mangala field as Sir Bill looks on

By Douglas Fraser
BBC Scotland Business Editor

"When we started, we were a $10m dollar company, and now in India we're a $10bn company," says Sir Bill Gammell.

The chief executive of Cairn Energy is in the Indian state of Rajasthan to mark the start of oil flowing from a giant oil field in the desert state near the Pakistani border.

Production at the Mangala field is expected to rise to at least 175,000 barrels per day - a fifth of the country's production.

With smaller fields being developed, the event signifies a huge shift in energy security for India, which has had to import about 70% of its oil.

Twenty-one years since it was listed on the London stock exchange, it also puts Sir Bill's Edinburgh-based company into a much higher corporate league.

"It has placed us on the map," he said. "We are now an international company of some stature, that has been able to develop what is now probably in the top 100 fields in the world as a national asset for the Indian government.

"That gives us credibility that we can go into partnership anywhere in the world. We're now just opening up a new exploration position in Greenland. We couldn't do that if we didn't have the calling card of what we've achieved over the last 20 years."

We thought it would be good for 60,000 to 100,000 barrels per day, but now we're saying publicly it is at least 175,000
Sir Bill Gammell
Cairn Energy

With a London stock market valuation of £3.6bn, the company has a 65% stake in Cairn India, and that calling card has also put it into the second stage of bidding for huge possibilities in Iraq, where the Indian skills base could prove useful.

Sir Bill said no decision had been made about whether to take that forward.

It will require further assessment of political risk as well as technical and commercial risk, and the question of whether Cairn could have an edge there with its operations.

The big Indian find was a big gamble. Cairn Energy paid £7m for a Rajasthani drilling block from Shell, which had given up on it.

It was 2005, and the company was burning its way through $100m of drilling investment, and was close to having to give up too - until drill number 16.

A call came at 4am one morning: "My exploration director said 'you won't believe what I'm seeing here. It looks too good to be true', which is usually because it is. But it turned out to be better than we thought at the time," Sir Bill recalled.

"We thought it would be good for 60,000 to 100,000 barrels per day, but now we're saying publicly it is at least 175,000.

"If you're committed to a strategy, you must play that strategy out," said Sir Bill.

Family friend

He links his team-based business philosophy closely to his passion for sport, having played on the wing for the Scotland national rugby team in the 1970s.

He is also noted as a friend of Tony Blair from schooldays in Edinburgh, and a long-standing family friend of President George W Bush.

Of the risks in the oil business, Sir Bill said: "You learn from your failures. We're always de-briefing and thinking about we could do differently. Failure is something I embrace, and it's something I encourage in my people to embrace, because we learn from it.

"In oil and gas, one in 10 works out to be commercial. If you are successful, you have to have the ability to replicate and follow up. For us the exciting thing is that we've got a very large acreage in Greenland, and if there's a sniff of oil, we're going to be right at the forefront of the potential there.

"The Arctic is one of the last great unexported areas of the world. When the oil price was below $40, people went for easier picks. Greenland's only had half a dozen wells ever drilled. We're picking up acreage in basins where nobody's every drilled before.

"The US Geological Society says the top 10 countries in the world include Iran, Iraq, Saudi, and in among them at number five is Greenland - and it's the only area where there's no production.

"The challenge is, as opposed to drilling a well in Rajasthan, where it might cost us $1m, in Greenland it might cost us $100m."

"If Greenland happened to come in, it would completely transform us. It has the ability because of the scale and the size to be something that could make us into a major - no doubt about it".

The full interview with Sir Bill Gammell can be heard on BBC Radio Scotland's The Business programme at 1000 BST on Sunday 30 August, and on BBC iPlayer.



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