The Hindu Business Line : ONGC decides to shelve refinery plans in Rajasthan

Slippery issues
ONGC has sought certain concessions including a discount of $4-5 a barrel on Cairn's Rajasthan crude oil.
Cairn has sought an international price for the 1.5-lakh barrels per day Rajasthan crude expected from end of 2008.

New Delhi , July 8

Oil and Natural Gas Corporation (ONGC) has decided to put on hold its plans to set up a 7.5 million tonnes per annum wellhead refinery in Barmer region and is trying to work out a sales and long-term crude supply agreement between Mangalore Refinery Petrochemicals Ltd (MRPL) and Cairn Energy for Rajasthan crude oil.

Sources told Business Line that 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 oil major has argued that without concessions it was uneconomical to transport oil from Rajasthan to MRPL's refinery.

Indications are that Cairn has sought an international price for the 1.5-lakh barrels per day 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.

These issues need to be sorted out before the company takes forward its plans to put up a refinery, sources said. Cairn's crude from Rajasthan, according to sources, is heavy crude with high wax content and requires specialised pipelines to transport it from Barmer to Mundra port in Gujarat for further shipment to MRPL's refinery for processing. Industry sources said putting up a refinery in that region might not be viable considering the huge investments involved. Besides, the availability of Rajasthan crude oil will be for a limited period, and import of crude oil for an inland refinery would prove to be cost prohibitive as it would not be competitive compared to coastal refineries.

ONGC has a 30 per cent stake in an oil and gas block in Rajasthan, where the British energy major Cairn Energy holds the remaining stake and operatorship.

Company's earlier plans

Announcing its plans to establish a refinery in Rajasthan, the company had said that its subsidiary MRPL would be the implementing agency for the refinery and the new venture entailing an investment of Rs 9,000 crore would be named Rajasthan Refinery Ltd. Following the commissioning of the refinery, ONGC also proposed to import crude through Mundra port pipeline to saturate the refining capacity, if needed.

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