Identifying new opportunities
In order to create and realise value, Cairn continues to seek out and pursue new opportunities. This means researching new licensing rounds, identifying blocks with good prospectivity, exploring our wider assets and expanding corporate opportunities.
Existing leads and prospects
We continue to evaluate our portfolio of leads and prospects in order to identify potentially suitable well locations to progress along the oil and gas life cycle. In the first instance, screening locations focuses on below-ground risks, and our geological experts look to identify suitable leads and prospects from available geological and seismic data. The aim is to ‘de-risk’ any lead to become a prospect at various grades of maturity. Before substantial investment is allowed, an investment proposal (IP) must be prepared for Board approval.
All IPs must include an assessment of Corporate Responsibility (CR) risks, which becomes more detailed as the prospect matures. Where further geological data is required through acquisition of seismic, a location-specific assessment of CR issues is developed – often in the form of an Environmental and Social Impact Assessment (ESIA) or similar assessment of risks to the environment and local communities. This is managed via our Project Delivery Process (PDP), which also takes into account health, safety and security risks, our CR Standard Operating Procedures and all relevant legislation.
Seismic data helps mature and de-risk prospects to allow decisions to be made on whether they are drill ready or not. Similarly, such reviews are used to enhance understanding of discoveries following exploration drilling in order to add value in appraising commercial viability and field development. At each stage of the project life cycle, CR issues and risks are identified and mitigated before any operation phase is initiated and managed via the PDP.
In 2015, we concentrated on reviewing our existing portfolio, particularly in shooting 3D seismic in Senegal. This included environmental and social assessment of the area to be covered, which identified issues associated with international and local artisanal fishing communities. We responded by communicating and managing operations with these communities to address any potential impacts on safety and fishing activities. We undertook a number of measures to minimise the impact of our seismic shooting on marine mammals and wildlife, including the use of marine mammal observers and passive acoustic monitoring (see Non-operated activities and international investments).
Although our main focus in 2015 was on building value in our Senegal assets with the commencement of our 3D seismic, exploration and drilling programmes, we continued to look for new opportunities both within our existing acreage and new venture activities.
Given that new ventures can involve substantial investment, IPs are required for these with the associated assessment of CR risks. We carry out a thorough review of the commercial, legal, political, regulatory, health, safety, environmental, security and human rights issues, and establish how best to manage them. In addition, we assess the technical and economic challenges as well as the potential business partners involved in an investment opportunity. Before entering into a business relationship, we undertake a process of information gathering and risk identification, with the option to undertake further third-party checks if any concerns arise. We use various due diligence tools that enable us to identify potential ‘red flags’ and establish whether these issues are manageable and if any resulting risks lie within our risk appetite statements set down by the Board. We acknowledge that at times this will mean there may be challenges to secure new acreage in line with our business plan while living up to our standards and responsibilities. This may result in rejecting what may otherwise seem attractive commercial opportunities.
Even in early stages where no immediate investment proposal is required, CR risks are taken into account. These can range from matters associated with personnel travel to difficult working environments to health, safety and environment (HSE) legislative requirements and initial assessment of location-specific CR issues.
As in 2014, standard assessment of risks associated with acquisition of new acreage and asset swaps continued as part of normal business during 2015.
Due diligence activities continued in respect of other opportunities, some of which did not progress to the IP stage, although CR assessments were included as part of the assessment process. An IP was also developed as part of our ongoing commitments in Senegal.
of investment proposals assessed the need for CR due diligence and covered HSE matters where required.
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