Listening to oilmen talk about the hunt for oil is always fascinating. Not surprisingly then, an early morning conversation with P Elango is not just another corporate interaction. The director (strategy and business services) Cairn India, is set to take over from Rahul Dhir as the chief executive officer from September 1. Despite a voice that has the thoroughness of an engineer and the elan of an explorer, it turns out Elango is a management graduate by training. In an interview with Jyoti Mukul & Ajay Modi, the 51-year-old says all they do in the company is find more oil and keep their costs low. Edited excerpts:
Cairn India acquired an exploration block in South Africa last week. Why did the company go for it?
The block is deep-water, where we got 60 per cent interest and also emerged as an operator. An interesting aspect of the block is it has had a gas discovery and gas fields have been discovered in the nearby region as well. So, unlike Sri Lanka, where we went to a frontier basin with no discovery, here the presence is established.
Does it mean the company will now focus more on opportunities outside India than just Barmer?
When we listed the company in 2006, the focus was Rajasthan. One of the key strengths of the company is single-minded focus in whatever we do. So, the focus was first oil from Mangla. It has been three years since we commenced production from Rajasthan and we have already produced 100 million barrels of crude oil. So, now was a time to relaunch the company to sharply focus on exploration. We thought we should step outside the Indian subcontinent but focus on a particular region and we chose South Africa.
Is there synergy between Vedanta’s mining operations and Cairn India in South Africa?
No. When we look at a region we consider it only if it is geologically exciting. In South Africa, they have an open bid process. In a frontier operation, we take a larger risk. But we were not dealing with a frontier region; so there was less risk. In a region like Africa, the capability to build infrastructure was seen as a big capability. Companies don’t just look at capital. Capital is available. They also don’t just look at technology. Companies today want partners that can make a difference to the quality of life in the area they operate in.
Is it a difficult field?
It is deep-water but we are quite comfortable drilling in deep-water. In Sri Lanka, we drilled three wells from 1,300 to over 1,500 metres of water depth and used fifth-generation rigs. Water depth in KG-D6 is less. It is also less in South Africa at 900 metres.
How do you compare Cairn with ONGC Videsh?
While considering a region, our first priority is to see if it is geologically exciting and if we can leverage our capabilities. In regions like West Asia, a company like Cairn cannot do anything different but in South Africa we can play our technology. OVL’s strategy will be a larger company looking at partnerships across regions but ours will be focused.
Your promoters, the Vedanta group, are learnt to be interested in having equity in the Rajasthan refinery.
Rajasthan had always wanted a refinery. In the past, Cairn has not been in the downstream business. Recently, the Vedanta group chairman has indicated support towards the establishment of a refinery, more like an investor.
Changes in the company management and board have caused investor concern. Your thoughts?
Cairn Energy had an arm’s length relation with the Indian unit, being a listed company. We used to look at L&T as a company that is essentially professional and we saw Cairn India in the same league. We built a facility in the desert to produce 25 per cent of the domestic crude output, a 600-km pipeline, we went to Sri Lanka and made a discovery and continue to operate the mature fields. Imagine the kind of leadership experience that this level of activity brings to a professional company.
Rahul Dhir’s decision (to leave) was a personal one to pursue his entrepreneurial interests. Over the last one and half years, we made some internal change. We expanded the executive committee. Earlier it used to have a CEO, CFO and COO. We made the position of COO redundant. We put in a place a director (Exploration), director (Development), director (Operations) and director (Strategy & Business Services). Below this structure we set up 15 operating units to develop next level of leadership under GMs. These are centres that will impact either cost or profit in some form. A good leadership bench has been built and business is being managed today by the next level and this gave Rahul the comfort to take a call to move on. Individuals will continue to take the call they wish to take but business will be as usual. The perception that churning is happening post Vedanta takeover is not correct. Cairn India continues to enjoy same level of independence and there is a support for growth from Vedanta.
If the company is doing very well, then why is it that original parent company is looking to exit and even professionals are exiting?
This is the time for the next generation to come in. I have spent 16 years in the company and I am not worried at all. I would have been worried if all this was going to affect the company’s performance as we have a depth of management. A typical oil and gas company like Cairn Energy takes a call to continue or exit based on its requirements in the absence of control stake. But it continues to believe in this company but will keep using its stake for further growth.
