Cairn India - Enhancing Energy Security for India

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http://www.cairnindia.com India is the world’s 5th largest importer of oil in 2010, importing ~75% of its oil needs. At US$ 103/bbl, India’s oil import bill would increase by US$ 20 bn in 2012. For India to Secure Oil for Sustaining Growth the options are 1. Domestic Exploration Efforts need to be Stepped Up. 2. Overseas Oil Equity: Natural Hedge against Increasing Prices. 3. Demand Management required to reduce Oil Intensity.

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Enhancing Energy Security for India November 2011

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2 Disclaimer These materials contain forward-looking statements regarding Cairn India, our corporate plans, future financial condition, future results of operations, future business plans and strategies. All such forward-looking statements are based on our management's assumptions and beliefs in the light of information available to them at this time. These forward-looking statements are, by their nature, subject to significant risks and uncertainties and actual results, performance and achievements may be materially different from those expressed in such statements. Factors that may cause actual results, performance or achievements to differ from expectations include, but are not limited to, regulatory changes, future levels of industry product supply, demand and pricing, weather and weather related impacts, wars and acts of terrorism, development and use of technology, acts of competitors and other changes to business conditions. Cairn India undertakes no obligation to revise any such forward-looking statements to reflect any changes in Cairn India’s expectations with regard thereto or any change in circumstances or events after the date hereof.

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• • • Domestic Production - BP Statistics (actual), Infraline (forecast) Projected demand @ 2.8%CAGR - EIA Annual Energy Outlook 2011 OVL overseas equity oil production, forecast @ 2.8% CAGR 3 India’s Dependence on Imports to meet Oil Demand to Grow Imports India world’s 5th largest importer of oil in 2010, importing ~75% of its oil needs Source:

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4 Increasing Impact on Economic Growth from Oil Import Bill Source: PPAC, Bloomberg, World Bank, FY12 GDP growth @7.5%  IEA forecasts average crude price of US$ 103/bbl from 2011-2015, compared to US$ 79/bbl over 2006-2010  At US$ 103/bbl, India’s oil import bill would increase by US$ 20 bn in 2012

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5 Options for India to Secure Oil for Sustaining Growth 1. Domestic Exploration Efforts 2. Acquisition of Overseas Oil Equity 3. Demand Management

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6 Domestic Exploration Efforts need to be Stepped Up  Only 22% of India’s sedimentary basin area is well explored  Nine NELP rounds held so far, with one large discovery  Intensity of exploration activities must increase  Capital and technology required – role of private sector will therefore be critical  Supportive policy and fiscal environment key to attracting investment

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20%  Largest oil discovery in India since 1985  First Oil in August 2009, now producing at 125,000 bopd  Innovative technology applications  At current envisaged basin potential of 240,000 bopd, production from Rajasthan will:  Contribute ~35% of India’s domestic production Rajasthan  Offset India’s crude oil import dependency by ~7% Imported & Domestic Quantity: MOPNG Data Future: Assuming Indian production remains at current levels of 2009-10. 7 Cairn India Rajasthan – Enhancing India’s Energy Security Indian Crude Consumption: 2009-2010 Imported 79% Domestic 21% Other Domestic ~65% Rajasthan ~35%

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 ~ 80% of value – potentially US$ 100 bn accrues to the Government Ravva  Recoverable resources tripled, expect to achieve > 60% recovery  >US$ 5 bn paid as profit petroleum to Government 8 80% of Value accrues to the Government Value Split: RJ-ON-90/1 PSC Rajasthan  In-place resource base of 4 bn bbls with additional risked exploration potential of 2.5 bn bbls Government – 80% (GoI, GoR, NOC) Cairn – 20%

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Inorganic Growth (Discovered Resources) Advantages: - Quicker to Production - Low Risk Disadvantages: - Costlier than organic growth - Competition for assets is high Organic Growth (Greenfield Exploration) Advantages: - Finding costs lower - Competition is less intense Disadvantages: - Longer lead time - Higher Risk 9 Overseas Oil Equity: Natural Hedge against Increasing Prices Options Potential for public and private sector companies to collaborate and share risks

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10 Demand Management required to reduce Oil Intensity  India’s crude oil intensity is high relative to developed and emerging economies  Policy efforts required to bring structural shift away from oil in key sectors – transport and industry  Japan’s 2006 National Energy Strategy includes ambitious targets:  Reduction in ratio of oil to entire primary energy supply to <40% by 2030  Reducing oil dependence in transport sector to 80% by 2030  Improve coordination with other oil consuming nations on use of Strategic Petroleum Reserves Source: Morgan Stanley Oil Intensity (Oil Consumption per unit of 2009 GDP)

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11 Conclusions  Policy interventions required  National Energy Policy required to set:  Long term vision and short term goals  Roles and targets for Private and Public sector  Establish National Energy Council to:  Raise energy security on our national agenda  Catalyze & coordinate Public/ Private initiatives     Cost of oil will continue to rise India’s oil demand will continue to grow with its economy Gap between domestic production and demand expected to increase To bridge the gap, we need to act now Where are we today? What do we need to do? Coordinated action between public and private sector key to meeting challenges

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