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Being a contrarian can have its rewards. Ask Bill Gammell, the Scottish oilman and close buddy of US President George W. Bush.
A few years ago, Gammell, the chief of Cairn Energy, made a move that had his oil industry buddies scratching their heads in wonder. He sold
Cairn's stakes in the North Sea and turned his gaze to Asia.
But Gammell didn't head to the Middle East or other oil industry hotspots like Indonesia or even Vietnam. Instead, he headed with drilling machines to the Indian subcontinent.
Ask any oilman and he will probably tell you that India is rated fairly low in the oil industry. The last gusher was back in 1985 when state-run oil company ONGC struck it rich in Gujarat, western India.
Since then there hasn't been much to write home about except some middle-sized strikes of natural gas. India imports about 70 per cent of its oil and the rest comes from places like the country's biggest offshore oilfield, Bombay High (discovered in 1974), and older strikes in sites like Assam in northeast India.
But against all the odds and the industry wisdom, Cairn Energy struck it rich in the Rajasthan desert four years ago. Cairn's Mangala field in Rajasthan - which is more famous for its forts, palaces and former maharajas - is reckoned to have about 3.5 billion barrels of oil and production is scheduled to start in 2009.
Inevitably, Cairn's stock went soaring on London's FTSE index. Gammell himself became Scotland's newest billionaire.
At that juncture, Gammell might have been tempted to cut and run - having defeated the odds once, it might possibly have been smarter to sell and get out. He did nothing of the sort.
Instead, like a good oilman who trusts his instincts and the geological reports, he upped the ante. Today Cairn is scouting for oil and gas in 15 blocks scattered in different corners of India.
It's searching for natural gas off the coast of Andhra Pradesh in southern India and it's putting drills in position in the northwest near the Pakistan border. Also, it has found gas near Surat in western India.
The result is that, after selling off its North Sea holdings, Cairn has about 90 per cent of its assets in India and Bangladesh. "Bill has a conviction. India was massively underexplored compared to Southeast Asia," says Rahul Dhir, CEO, Cairn India.
The Scottish company has also struck a gusher of another sort in India. Its local subsidiary, Cairn India, went public in December and raised US$1.4 billion ($1.7 billion) from the market. After paying off its parent company, Cairn India has a war chest of about US$600 million to throw at its exploration efforts.
"Technically we have demonstrated what we can do. And we have the financial resources," says Dhir, a former investment banker in London who got a multimillion-dollar package to sign on with Cairn India.
Still it hasn't been all smooth sailing for Cairn which part-owns the Mangala field with ONGC (Oil and Natural Gas Corporation).
The oil industry is always politically sensitive and the two partners and the Government have been haggling over how the Mangala crude oil is to be carried to the refineries. India's famous bureaucracy has ensured that the files have been working their way through the oil ministry at a snail's pace - though an agreement to build a pipeline is now on the verge of being signed.
Are there oceans of crude oil waiting to be discovered across India? If you'd asked that question a decade ago the answer would have been an emphatic no from the mammoths of the oil world such as Exxon and Shell.
Today, as they watch Cairn's moves, even the oil giants are hedging their bets. They haven't turned up in droves yet but they are taking a close look at the Oil Ministry's projections made when it auctions drilling sites. Says one oil industry expert: "Let's say that India has moved off the backburner for the majors because of Cairn."
Backburner or not, India has stepped up the hunt for oil in the last decade.
As the economy gains momentum India's thirst for oil has been climbing by about 7 per cent a year for the last three years. It's still way behind the oil-guzzling Chinese but the warning bells have begun to ring as the stuff is getting costlier all the time.
India's response has been multi-pronged. At one level, a state-owned company, OVL, (a subsidiary of ONGC) has emulated the Chinese and begun an international hunt for oil by prospecting in "interesting" parts of the world like Sudan and Azerbaijan. India is also negotiating with the Iranians and Pakistanis for a pipeline that would bring natural gas all the way from Iran to India and it's looking at a similar deal in Central Asia.
Closer to home the Government has done a u-turn and "privatised" its oil exploration policy, allowing companies such as Cairn and other international firms such as Niko Resources and Hardy Oil to make their debut here.
Also, the US$25 billion Indian giant Reliance Industries is drilling for oil and gas in promising regions like Gujarat and the Krishna-Godavari Basin off the Andhra Pradesh coast. Other Indian firms, too, have joined in the treasure hunt for black gold.
Reliance, the other big private player in the Indian oil game, has already struck a jackpot with big gas finds in the Krishna-Godavari region and has had smaller strikes off the Orissa coast in eastern India. Reliance is stepping up the hunt for both oil and gas and is planning to spend billions of dollars in the next few years.
Both Cairn and Reliance are running behind schedule because, as the hunt for oil steps up, there's a worldwide shortage of rigs. But Cairn is forging ahead despite these problems. It has already spent more than US$1 billion in India, making it the largest foreign investor in the oil sector, and Dhir reckons it will spend another US$1.5 billion to US$2 billion in the next three years.
He says both Gammell and exploration director Mike Watts were always convinced there was oil in a region.
Will oil strikes catch up with burgeoning demand? That seems unlikely on the evidence so far. But in this game you can only find a gusher when you go looking for one - and the hunt has barely begun.
