Govt allows Cairn to sell Rajasthan crude to pvt refiners

In a significant move, government has allowed Cairn India to sell crude oil from its Rajasthan fields to private firms Reliance Industries (RIL) and Essar Oil even as the company has also sought permission to export the oil on PSU refineries' continued failure to buy the entire output.

"The government has now agreed for private refiners to qualify as additional offtakers of the Rajasthan crude," Cairn India said in a statement.

Cairn, which began production from its Rajasthan fields in August-end, till now could sell the crude oil only to state-run companies. Indian Oil Corp, Hindustan Petroleum Corp and Mangalore Refinery and Petrochemicals had been nominated by the government to buy the Rajasthan crude.

Not only were the volumes committed by the state-run firms way short of the output from the Barmer district fields, IOC and HPCL had not begun offtaking their committed quota, necessitating roping in of private firms.

The three refiners have committed to taking 0.7 million tonnes of output during the remainder part of the current fiscal and 2.4 million tonnes in the next fiscal, a far cry from the planned production from Rajasthan.

Cairn, which is in dialogue with private refiners to arrive at an agreement, wants the government to allow it to export the crude so that a proper pricing for Rajasthan crude is discovered. But the government has so far not agreed to that, sources said. Cairn will this year produce a minimum of 1 million tonnes. Peak output of 8.75 million tonnes is projected in 2012.

Sources said Reliance and Essar have already expressed interest in buying Cairn crude. Reliance wants 30,000 to 60,000 barrels per day (1.5-3 million tonnes) of Cairn crude each for its two refineries at Jamnagar in Gujarat, while Essar has written for 30,000 bpd this year and 120,000 bpd (6 million tonnes) by 2011 when it expands its Vadinar refinery. 

This will be the first time that crude oil from a domestic field will be sold to a private refiner. So far, all the crude oil that is produced in India is consumed by PSU refiners.

IOC and MRPL have committed to 0.20 million tonnes each in 2009-10, while HPCL proposed to buy 0.30 million tonnes of Rajasthan crude.

In 2010-11, IOC would buy 1.5 million tonnes of the crude oil from the nation’s most prolific oil discovery in more than two decades, while MRPL would double its offtake to 0.40 million tonnes. HPCL would take 0.50 million tonnes next fiscal.

Sources said MRPL is the only firm that is buying Rajastan crude while IOC would begin taking the oil only in January. HPCL has not yet lifted a single drop despite agreeing to buy the crude, sources said.