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| Reliance, Essar keen to buy Cairn crude |
| Press Trust of India / New Delhi Mar 17, 2009, 15:18 IST |
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Reliance Industries (RIL) and Essar Oil are keen on buying crude oil from Cairn India's Rajasthan fields even as the Petroleum Ministry struggles to find takers of the nation's most prolific oil discovery among public sector firms.
Peak output of 1,75,000 barrels per day (8.75 million tonnes a year) from the Mangala, Bhagyam and Aishwariya fields in Rajasthan block is to first go to state refiners but Oil Ministry managed to get buyers for just one-third even though oil production is to start next month, industry sources said.
Indian Oil Corporation is willing to take 20,000 bpd (one million tonnes) at its Panipat refinery in Haryana and another 0.5 million tonnes at Koyali unit in Gujarat once a delayed coker is installed at the refinery.
Mangalore Refinery, a unit of Oil and Natural Gas Corp (ONGC) which is is the official offtaker of Rajasthan crude, wants only 1.2 million tonnes while Hindustan Petroleum says it can take another 0.5 million tonnes at its Vizag unit.
Sources said while PSUs are vary of taking the "waxy crude" that turns solid at normal temperature, private firms have written to Oil Ministry for substantial allocations.
RIL wants 30,000 to 60,000 bpd (1.5-3 million tonnes) of Cairn crude at each for its two refineries at Jamnagar in Gujarat while Essar Oil has written for 30,000 bpd this year and 1,20,000 bpd (6 million tonnes) by 2011 when it expands its Vadinar refinery in Jamnagar district.
A source said Cairn has written to the Petroleum Ministry saying it would be starting oil production from Rajasthan next month with an initial output of 4,000-5,000 bpd.
Under the production sharing contract (PSC) for the RJ-ON-90/1 block of Cairn, the government has to appoint the buyers of the crude oil or gas found in the area six months before the actual production.
Since the crude was waxy, refiners need to put up infrastructure to receive the oil. Laying of spur pipelines and special heated storages for Rajasthan crude would take about six months and the lapse on the Petroleum Ministry's part in finding buyers can derail production plans.
The Mangala field is expected to produce 30,000 bpd by the second quarter of 2009-10. Production is then expected to ramp up to 80,000 bpd by the end of 2009 before reaching a plateau of 1,25,000 bpd during H1 of 2010.
Besides 1,25,000 bpd of Mangala, the adjacent Bhagyam field would produce 40,000 bpd and Aishwariya another 20,000 bpd. The peak of 1,75,000 bpd would be reached in 2011.
Sources said initial production from the Mangala field in the Barmer district of Rajasthan would be transported in trucks to refiners in adjoining Gujarat state.
By Q4 of 2009, the 600 km insulated and heated pipeline from Barmer to Gujarat coast would be completed which would be used for shipping the oil.
Cairn is investing $850 million in a processing facility and another $800 million in a heated oil pipeline from the fields to the port of Viramgam in Gujarat.
Cairn India, the subsidiary of UK-based Cairn Energy, holds a 70 per cent stake and is the operator of the Rajasthan block. ONGC is its partner with a 30 per cent stake.
Sources said Cairn was working on a pricing formula. The crude from the onshore Rajasthan block RJ-ON-90/1 is waxy, low in sulphur, and has an API gravity of between 25 and 35 degrees. The company feels the Rajasthan crude could be benchmarked to Indonesian grades, which it resembles.
The government had earlier nominated Mangalore Refinery and Petrochemicals Ltd, a refining subsidiary of ONGC, as the buyer of the Rajasthan crude.
But MRPL is unwilling to take anything more than 1.2 million tonnes.
However, the domestic refiners have been holding out for a good price before committing to buy the new Rajasthan crude.
Cairn's Rajasthan project will be a substantial addition to India's crude oil production, which currently averages around 680,000 bpd.
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