http://www.cairnindia.com Cairn Connect is an internally created publication for all employees and stakeholders. It aims to create a common thread of communication and provide a vision to work together towards creating energy security for the nation.

1. COVER STORY
CREATING WEALTH FOR THE NATION
CHALLENGES OF THE FUTURE
QUANTIFYING SOCIAL
INVESTMENTS

2. Editor’‟sNote
Dear Readers,
refuses to translate into production!
to explore and discover and the endless meetings at
barriers associated with the remoteness of location and
is our endeavour to reach out to people working across
more shall follow, we have kept the focus on macro
trends of the sector and then relating the same to our
discoveries would be favourable!
Do write back to us with articles/views, critical or
otherwise at corporate.communication@cairnindia.com
respective individuals and these views do not consult to

3. CONTENTS
2 COVER STORY 18 HEALT EN HV SIATRO FE NM YEN
AND
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SA VI
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HE
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ANCE SUR
Cairn India: Creating Wealth for the
Nation and Securing Energy
People, Process,
12 H U MAN RESOURCES Environment
6 PERSPECTIVE
20 SOCIAL MEDIA
Drive to create O&G
Cairn India and Vedanta workforce of the future
Resources: Facing
Challenges of the Oil and Gas Companies:
14
Future O T Socially Connected
C R ES RP PO ON RS AIB IL E S TY OCIAL
O
Volatile Oil Markets:
Securing the Future
Quantifying Social Investments: IFC
Financial Valuation Tool and Cairn India
1

4. C O V E R S T O R Y
Cairn India:
Creating Wealth for the
Nation and Securing Energy
It is a classic story of the David and Mangala in 2004, the largest onshore bill this year could reach $100 billion if
the Goliath. A young E&P company hydrocarbon discovery in India since crude prices hover in the range of $100--
daring to dream, having the vision 1985, changed the scope and the nature $120/barrel with uncertainties in supply
and perseverance, was set to alter the of the business. The enormity of the from the Middle East. This would not only
balance of domestic energy production discovery, the largest in that year globally
for India, the largest democracy in the
world. Cairn has been unlocking value the league of organisations having a key
through discovery and development role in the energy security hence future the country has experienced double
of hydrocarbons in the sub--continent growth trajectory of India. Three out digit growth in crude oil production for
for more than 15 years. We pioneered of the seven landmark oil discoveries
deepwater drilling in India through made in India between 2000 and 2005 2006--2007 the crude production growth
Annapurna. Cairn also developed one have been by Cairn and the joint venture was 5.6% which dipped to 0.4%,--1.8%
partners. and 0.5% respectively in the last few
auction – – Ravva, off the coast of Andhra
Pradesh. Currently we are contributing 2011, the production by Cairn India and
resource nationalisation amongst Reliance led to a double digit growth in
domestic crude production through our countries and the emergence of the new domestic crude oil production for the
’“SevenSisters’”– – the state run oil and
to the 12th plan projects a growth rate
approximately 7%. The discovery of the of 7% for commercial energy demand
22

5. RJ--ON--90/1
RAVVA
PR--OSN--2004/1
For more than a decade, Cairn has been undertaking pioneering activities
3

6. Currently we are
contributing more than
a fifth of the country’‟s
domestic crude production
through our Rajasthan
fields. This is helping
offset India’‟scrude oil
import dependency by
approximately 7%.
for a GDP growth of 9%. This is only executing projects with the scale of our have been in the top quartile against
possible through a major supply side Rajasthan development, maximise the global benchmarks. Our terminal in
management. assets like Ravva (Andhra Pradesh), hydrocarbon facility, before connecting
applying technology to transform from with the market through our pipeline is a
Cairn India has been a trailblazer in a gas to oil in Suvali, Gujarat and design
lot of areas in the oil and gas sector. to implementation of new lines of maintained at half the global average
Over the years the organisation has last year. Responsibility and concern for
built an indigenous team with the continuously heated and insulated the environment has been integrated in
capability to execute projects across the pipeline from Rajasthan to Gujarat. In our operation strategy be it the usage
whole spectrum of the business -- be it our stage of transformational growth of environment friendly completion
exploration, discovery, development with the pipeline operations bringing in
and production. The team is capable of the desired scale, our safety standards environmental footprint or our well pad
4

7. design with horizontal deviated drilling
to optimise usage of land and minimise
disruption. We have been creating value
30th Aug 2011 Price % chg since
through substantial contribution to the
government exchequer with royalties
paid more than USD 1 billion, direct and
indirect taxes of more than USD 1 billion,
government of greater than USD 5 billion NIFTY 5,001 28
in foreign exchange due to reduced *Cairn India IPO on 9th Jan 2007
imports.
making the dream of India, an energy
The continuous growth in production independent country -- a reality. As we
and its asset base has led to increasing
valuation of the company, which has the organisation will keep working closely
ultimately enhanced shareholders wealth. with governments and communities
The investor community and the markets across the globe to develop faster, better
have also endorsed our initiatives to and more cost effective solutions for the
create value for our shareholders as a energy needs of growing economies thus
result of which the market cap of the enriching lives of the local populace.
company has nearly doubled from USD
6bn to USD 12bn since IPO.
Cairn India with the help of its joint
venture partners including ONGC
continues to create value and wealth
for the nation and strive towards
5

8. PERSPECTIVE
Cairn India and Vedanta Resources:
Facing Challenges of the Future
The world of extractive industries has continue to be stoked from emerging business. While a lot of the public oil
been under a variety of pressures with a markets in the east rather than the and gas majors, even the big guns,
seismic shift in terms of the way various western countries while the supply side have been vertically integrated with
sectors like mining and oil & gas function. been constrained due to multiple
has their presence across the chain from
The hard--hat world of oil, gas and mining
reasons of geopolitical risks, resource upstream to downstream and/or
has become intrinsically linked to the nationalism, complexity of development retailing, independent O&Gs have always
projects and location of resources acrosspreferred a particular segment for their
has helped democratise the sector in increasingly remote and unfamiliar
territory. on a global scale, competition is actually
increasing with the appearance of new
markets post the 2008 downturn, companies from emerging economies.
traditional instruments of trading andtransformation in terms of cost pressures,
hedging used by organisations have to consolidations, and nature of business
be conducted in a different light. On the as well as vertical integration, bringing commercial manner, along with further
other hand, demand in both the sectors about a change in the way we do privatisations in OECD countries such
66

9. Sectors like oil and gas and mining are continuing to climb up the political
priority list and according to a recent poll of global CEOs by PwC.
cost pressures, while many end users of global CEOs by PwC – – stakeholder
every step of the value chain (particularlymining products have also gained control
management, sustainability issues, etc.
in the U.S.) have also added to global of upstream assets. Companies are also are the key concerns of management
competitive pressure. To differentiate looking at other ways of achieving their
from new competition, international integration objectives, such as combiningchanging economic and social priorities,
strategic investment and off--take or governments across the globe are
partnership agreements to lower the tightening their grip on national resources
marketing, technological capabilities risk associated with integration, but still and are revisiting royalties and taxation
to explore and produce on the most policies. It is common knowledge that
investment in African Minerals with 20
challenging frontiers and scale and scope Sovereign Wealth Funds (SWFs), initially
to invest in new forms of energy. In the year off--take arrangement. set up with oil money, heavily invests in
mining industry, there is the scramble the sector but non--commodity based
to secure supplies of scarce resources Sectors like oil and gas and mining SWFs are gradually increasing their
continue to climb up the political priorityexposure in the mining industry in a bid
and to gain greater control over prices of
production units in an age of increasing list and according to a recent poll of to diversify their investment portfolio.
7

10. They also look for and leverage on the In Cairn India, Vedanta Resources has
under--valued resources. A key shift gained exposure to a new sector with
Vedanta is not the
has been the political overtones behind a top 20 non OECD E&P organisation.
SWF investments, with SWF route being Cairn India brings to the Vedanta stable --
often used to lead the charge by foreign more than a decade of credibility with
government to secure national resources.
pioneering efforts in the sector in the
sub--continent, landmark discoveries,
In such evolving times for both the reputation for technological adaptability
sectors, the acquisition of a majority stake innovation, exploration success
and
in Cairn India by Vedanta Resources plc
provides the perfect platform to build records, appetite for growth and new
the natural resource champion of the avenues of business (midstream) with
a measured risk approach, which has
gas, received in inher--
resource champion’”are some of the more often than not borne fruits, project
execution and delivery skills, and sound
energy philosophy and aspirations. corporate responsibility practices with
major to foray into oil and gas, while this In Vedanta Resources, Cairn India has
acquisition puzzled many. While about a majority shareholder and owner, who
gas, received in inheritance and built over
ambitions across various segments of the
oil and gas business, spanning multiple
ore miner, inked a deal with Petrobras geographies and helping leverage
and entered oil sector in 2007 to reduce
mining costs and currently holds stake ininternational markets.
more than 20 exploration blocks.
Vedanta has always shown an appetite top global oil and gas entity, offering
for strategic inorganic growth -- acquiring
unique value added solutions to cater
an asset and then scaling it up for to energy requirements of emerging
better returns, tending mostly towards economies across the globe with a deep
vertical integration in terms of taking footprint in only select markets -- and
supply leadership to optimise the
performance of existing assets. Their million tonne plus annual production
focus is on leveraging the low cost of business in copper and zinc and more
production, and in a lot of the acquired than 2.6 million tone for aluminum while
assets, infusing them with new energy to more than doubling its iron ore output in
increase production by many multiples. excess of 50 million tone -- underscores
the growth momentum, which can be
achieved despite economic pressures and
years and jump in revenue by 100 per geopolitical risks, hence being targeted
cent, while in Sesa Goa, the production for the next couple of years. Stakeholder
has gone up post acquisition by Vedanta,management, corporate reputation,
by 115 per cent and the reserves by 75 and the ability to deliver in challenging
per cent in three years. Its focus is on times will be the key to synergising and
organic and inorganic growth strategy for
creating a natural resources champion
bulk commodities and base metals. entity for the future.
8

11. 9

12. COMMODITY TRENDS
Volatile Oil Markets:
Securing the Future
Energy is pivotal to economic growth
and as India, country with GDP of over
economy and the fourth largest energy
consumer, marches into the league of
top economies in the world, the need for
energy, to secure the needs of current
as well as future generation, would grow
exponentially. As compared to US &
22 barrels & 9 barrels of oil a year, an
average Indian burns close to 1 barrel a
year – – representing the fact that there
is substantial upside for improvement
economy expands.
Securing energy is perhaps the security. Compounding the above geo-­politics;; weather to dynamics of
most critical challenge for India in fundamentals supply/demand.
maintaining its economic growth rate. It
encompasses both physical supply and stability of the country with oil import After recovering from the global
bill rising to approx. USD 100 billion in recessions, recent months have
(International Energy Agency) four major2010--11. witnessed several events like French
concerns -- Availability;; Deliverability;; Strike;; Middle East North Africa (MENA)
Affordability and Sustainability. The globalisation of economy in
the recent years has brought new Japanese Earthquake & Sovereign credit
opportunities, more interdependence crisis in US & Europe impacting the
dependence which was about 50% in thealong with larger group of risks. international oil prices.
International oil market in the current
over 75% of its crude oil requirements – –world is affected by events ranging from Oil prices rose to $125/bbl plus in April,
creating serious concerns on the supply broad based macroeconomic picture;; however receded subsequently due to
10

13. have a pro--founding impact on the
economy and energy sector. In this
situation, increasing the domestic
production and reducing the import
reliance is an important element for
ensuring supply security.
which is now accounting for more
crude production, has contributed
security and bringing economic
to savings of foreign exchange and
the double dip recession fear looming crude prices in 2012 due to tight supply is now responsible for the delivery
demand fundamentals, Citibank in crude
Reduction in growth forecast of US, its latest forecast has predicted $86/ production from its
Europe & China (contributing 50% of operated assets
year placing importance on the credit across the
with high unemployment & weak events. Uncertainty & volatility of this country.
economic data is forcing authorities to magnitude creates further challenges
come up with more income generating in ensuring a stable and secure energy
policies and get economies on a atmosphere.
meaningful growth trajectory.
Ensuring supply security remains an
Market uncertainty is evident from -- Varun Gujaral
extremely challenging task for the Commercial and New Business
the wide forecast of oil prices by Government as dynamic
International participant going into next global environment
year. While most research divisions
11

14. Drive to create O&G
workforce of the future
12

15. In recent days, the markets have deploy, and connect employees through
signalled concern about the economy.
and lagging economic indicators, This issue has become particularly
consumers, investors and businesses
are searching for some bright spot in workforce, combined with a diminishing
the market. Many believe that the oil pipeline of new and experienced talent.
and gas industry, which has consistently To guard against corporate brain drain,
shown strength during this lengthy companies need to formulate effective requires commitment,
economic downturn, has the potential strategies to attract and engage the cooperation, investment
to help lift the economy if the right
energy policies are in place.
generation is not all. It is also about
The industry, while shows promise, managing existing talent and developing
is faced with its own challenges and the periodic table of talent.
uncertainty. In addition to the existing
challenges relating to global energy
security, long term sustainability and the International Oil Companies (IOCs) are
uncertainty surrounding the investment facing a real challenge that may have an
framework, the oil and gas industry impact on expansion and growth plans,
will face ’“new’”hallenges. Future
c a challenge that requires commitment,
energy demand is expected to grow cooperation, investment and new
substantially and the sector is in need of approaches in developing, managing and
massive investment – – not just capital. retaining the talent pool.
Collective collaboration and coordinated
In order to meet the demand, the There are many issues that call for an cooperation between government,
industry will explore, develop and academic and industry on the various
produce oil and gas in increasingly their strategies in the face of slowing issues related to curricula, employment
severe conditions. The ability to plan and social policies, and programme
and execute large--scale, complex NOCs and IOCs avoid ranging back and
development projects requires a highly forth between skill shortage and skill term than isolated initiatives.
yet professionals with the required skill--and IOCs joining forces, learning lessons
set are a scarce commodity. environment operational challenges will
Over the last few decades, average age The challenge facing NOCs and IOCs to develop skilled personnel, manage
of workforce in Indian upstream oil and costs and develop new technology. This
sustainable long--term solutions to situation creates new challenges and new
Whether one believes it is the result manage workforce demographics, both uncertainty, but also new opportunities
of normally occurring competition, in boom and bust times. for cooperation and partnership between
attrition, aging or restructuring, one NOCs, IOCs and services companies,
theme permeates the current discussion Partnership between NOCs and IOCs to share risks, technology advances and
around human capital: how to develop, can contribute to addressing the invest in R&D.
13

16. Quantifying Social Investments
IFC Financial Valuation
Tool and Cairn India
Discovering the past to create a better portion in distributing the fruits of implementing programmes in remote
hydrocarbon development to the resident regions, to the oil trader surrounded
business for extractive industry includingcommunities, trying again to balance this
oil and gas. It is this dichotomy of need for developing energy resources attendant – – seemingly diverse persons
synergising the past with the future, with the pace of development of the united by the same product. The same
by adhering to regulatory frameworks, local communities. paradoxes are also prevalent in costs.
balancing investor expectations While most are aware of the almost
and striving to create value for all perpetual windfall gains in the oil
stakeholders, dealing with the sentiments community engagement initiatives
of business, one overlooks the risk capital
which surround ’“nationalresource’”, is not often appreciated or understood deployed during exploration time running
all this while operating in the most remote companies. Oil and gas is a sector
by into hundreds of thousands of dollars per
of regions across countries with state of which offers a myriad range of activities, day in remote onshore or offshore areas!
the art technology. all seemingly disconnected but bound
around a common product – – the crude Fraught with such inherent
oil
Gaining the trust, cooperation and or the gas! contradictions, it is imperative to have
partnerships of communities in these a strategic approach for designing and
frontier regions often becomes a business range of activities range from the implementing community development
The
necessity to ensure uninterrupted programmes in order to ensure that they
operations and business activities. Since or oil services company person on the rigdeliver the desired results of community
the riches of the subsurface are often support, mitigate risks, and help in the
found in the poorest and most remote ofof summer, to a community engagementunhindered growth of business.
regions, organisations invest a sizeable or social responsibility specialist
14

17. up with the Sustainability Planning and
the absence of any standardised Financial Valuation Tool. The model was
measurement matrix entails that the piloted on a couple of projects like the
impact of the social, environmental SMS programme initiated for farmers
and community investments cannot be in partnership with Reuters along
tangibly measured in business language.
longest heated and insulated pipeline
in the world) and the mobile health van
investment for social initiatives also posed
programme in Rajasthan.
various problems like:--
““Throughthis tool companies can
Not being able to maximise the full develop metrics to guide their community
potential/impact of the investment investments and translate community
Not being able to compare the program outcomes into company value,
in terms that are understood by the
investments market – – risk reduction, productivity
Not being able to advocate, gains, savings, return on investment,
communicate, support and justify the
and enhanced reputation. An additional
investments incentive is that high--performing
Not being able to prioritise environmental and social programs
investment options are increasingly seen as a proxy for
effective business management.
initiatives According to Multilateral Investment
Awareness about such investments Guarantee Agency (MIGA), a World Bank
within organisation and cross-- political risk insurer, they would reduce
functional collaboration insurance premiums for an operation that
demonstrates rigorous risk management.“”
Cairn along with Newmont and Rio
Tinto are the organisations with whom – – Excerpt from IFC article on Valuing
IFC collaborated extensively to come Returns on Sustainability Investments.
15

18. The tool has been designed in a way to
supplement the traditional discounted
cost of manpower, etc.) while the latter
the quality of social investments
in the organisation but also contributions
investments through community risk
mitigation which involved steering clear simulation (algorithms which utilise
of risks which could result in delay of repeated random samplings to compute
etc. to wholly participate in the construction, production postponement, results) to arrive at a net value accrued
implementation of the tool. planning, legal action, etc. to the company.
The two basic concepts comprising the The process involves rigorous
tool are direct value creation and indirectstakeholder analysis, traditional with Reuters involved providing crop
1616

19. Traditional Value Creation
+ + +
Stakeholder Investment Value Protection (Cost benefit
Analysis Analysis (MPV) (Indirect benefit) analysis)
1 2 3 4
Quality of Net Value to
+ +
Risk Monte Carlo
Quantification
5
Sustainability
Investment
Simulation
7
= Company From
Sustainability
6 Investments
Source: IFC Article
advisory and marketing information van. The van operated and traveled
through the mobile phone for 10,000 to 64 villages in and around the Cairn
farmers along the Cairn India pipeline project area in Rajasthan. The FV tool was
in Gujarat. This programme not only able to calculate and ascertain that this
helped maintain a continued relationship
with the farmers but ensured that the the company as the alternative to setting
communication was two way. up 15 clinics to provide similar services to
the concerned population.
The farmers could also through their
mobile phones inform the organisation Another key saving was in terms of
about breaches in pipeline security mandays for workers from the village.
with pilferage, leakage, sabotage or With the van servicing the local village
other maintenance issues. So while the populace, loss of manhours/days due to
SMS programme helped increase the illness of village workers were minimised
income of farmers through the price and made negligible.
advisory, the farmers were also able to
act as the pipeline reporting contact for The same FV tool could be applied
the company. So both the modes of holistically to quantify the returns of
value creation and value protection was various other CSR programmes and
provide a direction to implement future
it also helped the company by providing
an effective replacement for pipeline
security personnel. management support and commitment,
an attitude for cross--functional support
cases of pipeline security were reported management, etc.) and developing
by farmers, thus preventing sabotage, requisite expertise like value drive
leak, and damage to the pipeline,
cost of $2 million for the company.
The second project studied was one
which involved access to preventive and
curative healthcare – – the mobile health
17

20. People, Process, Environment
Oil & Gas is considered to be an unsafe Respect: for people, communities, the the way he/she arrives at the work in the
environment, the rule of morning. Our goal is to create a healthy,
at various stages can be a threat to the law and human rights;; supportive working environment that can
health and wellbeing of not just people help reduce absenteeism due to fatalities.
working on site, but also the communitiesRelationships: we believe that building
strong, open and lasting relationships
with our stakeholders is not merely comprehensive one, wherein all the
Good governance is the only way one a social responsibility but is vital to process and procedures, to effectively
can ensure an economic climate which achieving our business goals;; and
laid down. This system ensures that
is favourable not only to investments, Responsibility: We recognise our
but also well being and sustainability the policies are implemented across
responsibility to ensure our actions do various activities through design,
of people and environment that we not harm people, the environment or
come in contact with. We, at Cairn, are society. implementation, operations, monitoring
committed to protecting the health, and reporting as it is based on the
safety and wellbeing of people working While we follow the highest level of
on our sites, people who come in contactinternational codes and standards in our
with our operations and the health and
implementation in progress for the
sustainability of environment that we upgrade them.
operate in. ’„ Rajasthan operations.
We take precautions to avoid accidents or
Our Corporate Responsibility
pollution incidents, and all our operations
Management System (CRMS) lays down The nature of the work involves some have rigorous procedures, equipment
detailed guidelines and procedures that inherent risks and facing challenging and emergency teams in place to
support the delivery of our commitment environments. We strive to make sure
that everyone associated with our work training is mandatory for all visitors to the
goes back home in the evening exactly site to ensure their safety.
values and our approach to business.
18

21. Companies are increasingly becoming
recognition from time to time. This cautious about the issues concerning
year, the Rajasthan operations won nine environmental protecting, including air, ETY EN
AF
safety awards in the 24th Mine Safety land and water quality. S VI
Awards organised under the aegis of the RO
Most of it is due to the heavy regulations N
DGMS, Rajasthan.
and compliances. These regulations
ALTH MENT
Environment continue to evolve. For example, the
HE
According to the ’„Ernst& Young (EPA) greenhouse gas reporting rule was
AS
and production sector on November 8, ANCESUR
2010 and requires companies to report
the climate debate will continue to
their 2011 greenhouse gas emissions
complicate the strategic decision--
beginning in March 2012.
making of oil and gas companies across
the industry.’” We at Cairn have been committed to Our approach to each new project
includes undertaking Preliminary
Today, climate change and sustainability minimising the impact of our business
on the environment. We introduced Environmental Impact Assessments
issues are a key component of corporate (PEIAs), Environmental Impact
stringent measures, from initial impact
agenda. The stakeholders are as Assessments (EIAs) and Social Impact
assessments to waste management, and,
much interested and passionate about Assessments (SIAs), to minimise any
in the event of any unplanned incident,
these issues as they are about the potential impacts of its activities
have put in place comprehensive
compensation. emergency response and oil spill
contingency plans.
19

22. Oil and Gas Companies:
Socially Connected
Social networking is booming. Facebook communications, including knowledge
has become the most visited website on and information management for 20
percent of business users.
AccordingtoastudybyMicrosoftand
Internet population visit social networking
or blogging sites. Accenture,nearly75%ofoilandgas
professionalsseevalueinusingsocial
Social networking is facilitating business mediaandcollaborationtoolsat
and personal relationships, with
communications,
individual sectors now starting to cotton
on to the potential of information sharing
via these channels. technologyatacorporatelevel.Thestudy
whichsurveyed275professionalswithin
Gartner predicts that by 2014, social international,nationalandindependent
networking services will replace e--mail oilandgasandrelatedcompanies,found
as the primary vehicle for interpersonal thatsocialmediaandcollaboration
20

23. technologyadoptionisprimarilya
companies that are using social media
thesametime,halfofthosesurveyedsaid tools for other purposes. Chesapeake
theircompaniesprohibitorrestrictthe Energy has successfully implemented
useofmanyofthesepubliclyavailable
tools,suchasphoto--sharingandsocial stream that posts current job openings,
networkingsites. interacts with followers and offers
career advice to nearly 2000 people.
On the other hand, the oil and gas
industry itself boasts of various social
networking sites, such as www.energy-- opportunity to communicate via social
networks.net, www.oilandgascommunity. networks to media, Gulf Coast residents
com, www.hsee.co.uk and www.oilpals. and businesses affected by the spill,
com. These are facilitating knowledge concerned citizens, and employees.
and information management.
Energy is a highly regulated industry, industry from social media is most likely
and its companies are required to make the increased productivity, thanks to
information available to their work forcesimproved collaboration and knowledge--
sharing between workers. These
manner. Cloud computing, public elements are important for driving
instant messaging systems and internal revenue, cutting costs and contributing
social networks allow for more cross-- to the health and safety of workers (Oil
and Gas Collaboration Survey 2009)
barriers while keeping up with the
changing face of technology. industry.
21