Request you to kindly drop in all your mails/queries to or call us at
+91-120-6799125 (D); +91-120-6799100 (B)

B C Bora, Chairman, Interlink Petroleum Limited

16 Dec 2010

Bora, former CMD of ONGC Ltd, and the current Chairman of Interlink Petroleum Limited found time to interact with InfralineEnergy to discuss the company's future plans. BSE Listed Interlink Petroleum operates two small fields - Baola and Modhera - in Gujarat near Ahmedabad. The fields were earlier held by ONGC. Under the current management, the company has come out with an aggressive exploration and production plan to monetise these fields. The company recently announced the discovery of oil in its Baola-8 well. One more well is planned in March 2010 in the nearby Modhera field.

In a discussion with Infraline, the Chairman of the company, shared his vision for the company. Interlink Petroleum recently announced the discovery of oil in its Baola-8 well, situated in Gujarat.

InfralineEnergy's Chhavi Tyagi discussed this development and other issues affecting the exploration and production sector of India with the Chairman.

Edited excerpts

Tell us more about the recent discovery made by Interlink Petroleum in Baola field.

We took over the Baola field in the year 2008. After undertaking the 3D Seismic data, we identified a good location for drilling. Mud log and electric-line log evaluation, geochemical evaluation of side-wall cores and after a preliminary testing, we drilled a well there. We drilled to about 1100 meters and tested a particular sand there which produced oil. We employed a rather expensive way of drilling but still it took some more testing of the well. But then, the oil overflowed to the surface, which is a very good indication.

In fact, Baola field was earlier producing gas for about 3-4 years before we bought it. The well had some mechanical problem later on because of which it could not produce more oil. It was set in for about 4-5 years and after we took over, we decided to look over the whole thing afresh.

Afterwards, we started drilling this well and found oil in this area. However, we have to test this well conclusively to establish both the results as well as the production capability. This process will take place over the next 3 months.

What have been the other significant achievements in this discovery?

Another significant discovery is that we found two to three other layers of hydrocarbons here, which, again, is quite interesting. However, unless we test it, it is difficult to say what is producible and how much is producible. The initial indications, though, are that there might be more than one sands in the field and hopefully, we will discover something more, including gas, which was earlier available.

What kind of reserves and upsides are you expecting?
It is impossible to make an estimate at present. We are not supposed to make any disclosure without undertaking any testing. Also, as per the new guidelines by DGH and the government, this has to be approved by the DGH as well. All I can say is that we have dismantled the drilling equipment which we chartered from Dewanchand. We are in the process of bringing in what is called work over rate and we will then test this well systematically. Hopefully, by early next calendar year, we should start drilling this well.
What progress has been made till now in the field?
We already have a few production facilities established for gas at the field, which were there before we took over the place. Afterwards, we also added some more facilities to it. As for the rest, it would not be a big job as there are systems available on rent in Gujarat and it would not take long to put it all together. In case the test proves to be positive, we will be able to put the facility together for regular production in the next two to three months.
How much investment do you think the field would require?

We are still in a testing phase and therefore, we do not have a huge requirement immediately. But, we are looking at half a million dollars.

"As of now, we are finding out parties who are interested in investing in E&P further. Since last time, we could not finish allotments, some of the investors who had expressed their interest earlier have been approached and we have decided to take that further."
In case, the oil comes into production then depending on the production capability, we may have to put in another half a million dollar to bring it into production.
What kind of fund raising activity are you planning to undertake?

We are looking at two to three options; one is, of course, external commercial borrowings (ECBs). Another option is the infusion of additional equity, but we have not yet finalised this. We are in the process of talking to some of the banks about ECBs, while also getting into the equity exercise. As of now, we are finding out parties who are interested in investing in E&P further. Since last time, we could not finish allotments, some of the investors who had expressed their interest earlier have been approached and we have decided to take that further.

Over all, it is going to be a mix. Right now, we are focussing on the ECBs as it is the fastest and as we need to start the work immediately, we need funds and in this, ECB would meet our requirement. However, in the longer run, we are simultaneously looking at raising further equity.

What are the ways you are looking at to monetise this discovery?

After we complete the test by the next two to three months, we should be able to finalise the plans for further expansion. As soon as this is producible and after taking all the necessary action, if we find that there are more prospects, then we will definitely think of further expansions. For that further expansion, we will again go for ECBs because it is already a discovered field. Then, depending on the quantum of results, the production capacity of the wells and of course, the limited area that we have, we will develop the plant further. This would have to be approved by the DGH before we take up the plans. By the end of the next financial year, we should be able to go ahead with the fields.

Apart from your funding plans for Boala-8, what are your other funding requirements for the rest of your projects?
We have another field called Modhera, where, again, we are contractually bound to drill at least one well. We got this field on a Mining Lease about less than two years ago. We need to do drilling there as well for which we will require some more funds. For this field, we need close to 5-6 million dollars of extra infusion of funds which will take care of drilling as well as testing of this well and a little production. This phase of work will then decide on the future requirement, depending on what we get out of this stage.
How is discovering oil in Baola field (Baola-8 well), which is primarily categorised as a gas field, going to change your plans for the field?

Finding oil in Baola-8 well, primarily a gas producing well does change our understanding of the field geology. Had we discovered only gas there, we would have immediately put it into production as we have installed production capability there, including a pipeline for evacuation. However, for oil we will have to put some extra facilities for which we require more funds and more space. Though it would not be a big investment and we should be able to make arrangements for production in the next two to three months time. However, finding oil in the field has been an addition as now we will have oil besides gas to offer in the market and thus the field will be much more attractive.

What is the progress of activities in Modhera field, another field operated by Interlink in Gujarat?

We took over this field about two years ago and then, undertook 3D Seismic data work. We, then, processed the data and based on that, we also identified some reliable locations. By the end of this financial year, we should be in a position of drilling the first location. This is our plan of action, for which we are trying to raise finance.

"Another thing we are looking at is that the Government of India, ONGC or DGH are planning to offer some discovered fields for private companies to come in and develop in the near future."

We have high hopes of finding success here, based on the field's history. Earlier, ONGC had drilled a well here, which was terminated prematurely before achieving the original objective. Nevertheless, they discovered some heavy oil which was not produced at that time. Now, we hope not only to find that heavy oil in this new well but also go deeper for the possibility of finding some light oil. However, unless we start the drilling we cannot say whether the oil would be there or not or whether it would be commercially producible. Giving us hope in that matter is the fact there are indications of such light oil in the Cambay Basin and since geologically, this field is on the same level we hope to find light oil here as well.

What are the company's future plans apart from these two fields?

At present, we are focused on these two fields. Our top priority is to bring these two fields into production. Another thing we are looking at is that the Government of India, ONGC or DGH are planning to offer some discovered fields for private companies to come in and develop in the near future. We are also looking at NELP-IX, which has been just announced, and in case we find some worthwhile opportunity, we will try to bid for those too.

What are the positive and negative features of the Indian policies regarding exploration and production of O&G?

One major issue is the stability of fiscal regulations. Though the government had indicated the fiscal terms and such regulations, they have revisited them from time to time. Natural gas was not given the same status as oil, though NELP's terms stated that the operatives will be at the liberty to sell the gas and also to fix the prices but the government intervened through a policy of gas allocation and also for the pricing of the gas. All these policies should be told ab initio so that people can factor in these things while bidding for the blocks. Also, once you have factored in certain issues, they should not be revisited or reopened.

Another issue is the absence of the single point clearance because of which several operational issues remain unresolved for a very long time. Issues like starting operations, environmental clearances, mining lease and such. I think that the government has to set up certain machinery to have a single window clearance so that all these issues are addressed. This would go a long way in addressing various issues and give the necessary confidence to the people to start on their work. These are the two issues which are affecting the main operations.

Another issue affecting the sector as a whole is the service sector in India, which, unfortunately, has not matured so well. The government has to do something to see that the service sector has some incentives to provide quality service at a competitive cost in India. This is a problem across the board, whether you talk of drilling or Seismic survey, data processing or other types of services. Unfortunately, the standards vary widely, the prices vary widely and quality has a big question mark, for at least some people. These issues have to be looked into by the government to see that we have quality service at quality prices in India.

These issues have been raised by many oil companies, particularly, private oil companies in various forums in the past but the government has been very slow to bring in the reforms, to set in certain standards for improving the situation.

Though I am not saying that the situation is totally hopeless, there are some positive signs as well. The government has progressively improved on the policies. For instance, NELP is a great step because everybody has a level playing field, whether be it the public or the private sector, now all have to compete to get a project.

However, the rate of progress is very slow. We are already in the ninth round of NELP and by now we should have perfected it but, even today, we have a lot of ifs and buts. These should have been sorted out.

The rate of progress is very slow. We are already in the ninth round of NELP and by now we should have perfected it but, even today, we have a lot of ifs and buts. These should have been sorted out.

I understand that the government also has some constraints and to the extent possible, they are making changes but I think they may have to relook at the whole thing and put a time frame to resolve the issues. Even if the government says that we cannot do it overnight but progressively we'll do it that is also a good message. This gives confidence to people, including foreign companies, that the government means business and that they will do it.

(InfralineEnergy thanks B C Bora, Chairman, Interlink Petroleum Limited for sharing his valuable insights with our readers. The column ‘In Conversation’, is a platform to engage experts from various sectors to share their views on the different transformations in the Indian energy sector.)