Uncertainty over the evacuation of crude oil to be produced by Cairn in its Rajasthan block may be over soon. The government has asked Mangalore Refinery & Petrochemicals (MRPL) to explore the possibility of lifting the crude jointly with Indian Oil (IOC) and Hindustan Petroleum (HPCL). MRPL had recently said that it could lift a maximum of 1.2 million metric tonne of crude every year, whereas peak production in the field is estimated at 7.5 MMTPA.
The petroleum ministry is also believed to have asked MRPL, IOC and HPCL to jointly carry out price negotiations with Cairn. A source confirmed that “the ministry has directed MRPL, a downstream subsidiary of ONGC, to involve IOC and HPCL for lifting the crude oil.” The direction comes at a time when Cairn is all set to produce first oil in 2009. Cairn’s crude oil price and MRPL’s capacity to process the waxy crude are two major issues to be resolved to ensure evacuation of oil from the Rajasthan block.
According to sources, both IOC and HPCL would be willing to buy Rajasthan crude “at the right price.” A right price could not be achieved as public sector oil companies are insisting on a discount. Sources said a discount was sought as the crude was stated to be waxy in nature, which is difficult to transport to the refineries. Construction of a pipeline from the field to a coastal location in Gujarat will strengthen Cairn’s bargaining position.
However, Cairn is unwilling to give a discount. As per the deal between the government and the contractor (the consortium of Cairn and ONGC), Cairn is bound to sell its crude oil from Rajasthan to the government nominee MRPL at a price agreeable to both parties. So far, no agreement over pricing could be arrived at and MRPL has expressed inability to lift the entire crude from the field.
Issues like shifting of delivery point (from well-head to another location) and inclusion of pipeline (from the field to a coastal location in Gujarat) are also pending government approval. So far, the government has granted the rights of use to Cairn, which allows it to secure access to the land to build the pipeline from Rajasthan. It, however, does not mean an automatic approval for the project cost or a nod for shifting the delivery point.
The petroleum ministry is also believed to have asked MRPL, IOC and HPCL to jointly carry out price negotiations with Cairn. A source confirmed that “the ministry has directed MRPL, a downstream subsidiary of ONGC, to involve IOC and HPCL for lifting the crude oil.” The direction comes at a time when Cairn is all set to produce first oil in 2009. Cairn’s crude oil price and MRPL’s capacity to process the waxy crude are two major issues to be resolved to ensure evacuation of oil from the Rajasthan block.
According to sources, both IOC and HPCL would be willing to buy Rajasthan crude “at the right price.” A right price could not be achieved as public sector oil companies are insisting on a discount. Sources said a discount was sought as the crude was stated to be waxy in nature, which is difficult to transport to the refineries. Construction of a pipeline from the field to a coastal location in Gujarat will strengthen Cairn’s bargaining position.
However, Cairn is unwilling to give a discount. As per the deal between the government and the contractor (the consortium of Cairn and ONGC), Cairn is bound to sell its crude oil from Rajasthan to the government nominee MRPL at a price agreeable to both parties. So far, no agreement over pricing could be arrived at and MRPL has expressed inability to lift the entire crude from the field.
Issues like shifting of delivery point (from well-head to another location) and inclusion of pipeline (from the field to a coastal location in Gujarat) are also pending government approval. So far, the government has granted the rights of use to Cairn, which allows it to secure access to the land to build the pipeline from Rajasthan. It, however, does not mean an automatic approval for the project cost or a nod for shifting the delivery point.
Via: India Economic Times
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