The Hindu Business Line : Negotiations on between MRPL, Cairn for crude from Rajasthan

Tough talks
Indications are that Cairn has sought an international price for the 1,50,000 barrels per day Rajasthan crude expected from end of 2008.
ONGC is stating that the Rs 2,000 crore, which the company would be putting in to build a pipeline for crude transportation, needs to be compensated through discounts.

New Delhi , June 9

Tough negotiations are going on between Mangalore Refinery Petrochemicals Ltd (MRPL) and Cairn Energy on a sales agreement for Rajasthan crude oil.

Sources said a meeting is expected some time next week between the two companies to reach a consensus on the issue.

Oil and Natural Gas Corporation (ONGC), on behalf of its subsidiary MRPL, has sought certain concessions including a discount of $4-5 a barrel on Cairn's Rajasthan crude oil.

The company has been arguing that without concessions it was uneconomical to transport the oil from Rajasthan to MRPL's refinery.

When contacted by Business Line, both Cairn Energy and ONGC maintained "negotiations are going on between the two companies".

Indications are that Cairn has sought an international price for the 1,50,000 barrels per day Rajasthan crude expected from end of 2008.

ONGC, on the other hand, is stating that the Rs 2,000 crore, which the company would be putting in to build a pipeline for crude transportation, needs to be compensated through discounts.

Cairn's crude, according to sources had high wax content and needs specialised pipelines to transport from Barmer, Rajasthan to Mundra port in Gujarat for further shipment to Mangalore Refinery for processing.

Under the terms of the product sharing contract (PSC), Cairn is obliged to sell the crude to the Government of India until the country is self-sufficient and the Government had the right to appoint a nominee to take delivery of the oil. In September 2005, MRPL was nominated by the Government to purchase the entire crude produced from the block, in accordance with the relevant provisions of the PSC.

Cairn had recently got the nod for its Field Development Plans (FDPs) for the Mangala, Aishwariya, Saraswati and Raageshwari fields in Block RJ-ON-90/1, Rajasthan, from the Management Committee (Directorate-General Hydrocarbons, ONGC and Cairn).

This final approval follows the earlier agreement on the FDPs reached at the joint venture operating committee between Cairn and ONGC.

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