The Hindu Business Line : ONGC, Cairn agree to find best crude price for Rajasthan fields

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New Delhi Feb. 27 With no conflict between the producers of Rajasthan field - Cairn India Ltd and ONGC - on the issue of crude price, the two entities have decided to approach the Petroleum Ministry to reach a final figure.

A senior ONGC executive told Business Line that there is "no difference of opinion between the two producers". A senior Cairn India official said, "some clarity on pricing emerged. The two of us have agreed as joint venture partners to find out what is the best pricing. Now a decision has to be taken by the Ministry."

According to the ONGC executive, at a meeting between Sir Bill Gammell, Chief Executive Cairn Energy PLC, and Mr R. S. Sharma, Chairman and Managing Director, ONGC, here on Tuesday, a decision was taken that the two companies would meet the Ministry officials in the next 10 days to resolve the imbroglio with the buyers over crude sales by arriving at a price based on which they would offer the produce.

Potential buyers of Cairn include all the state-owned refiners such as Bharat Petroleum Corp, Indian Oil Corp, and Hindustan Petroleum Corp, as well as the private sector players such as Reliance Industries Ltd.

The production-sharing contract (PSC) signed with the Union Government requires price to be fixed by references to a basket of f.o.b. (free on board) crude adjusted for differences in quality, delivery time, quantity and payment terms.

As per the price proposed by an international consultant, KBC, the crude could be priced at $ 58.30 a barrel.

Apart from the pricing, the two chiefs also discussed the issue of mid-stream activities - pipeline project for the transportation of crude. The deliberations on pipeline concept, project report and implementation took place, the ONGC executive said.

"ONGC's technical team is already working on it and we have asked Cairn to hold discussions with them so that mechanism to optimise cost can be worked out," he added.

Both ONGC and Cairn have appointed their consultants for the pipeline project.

As regards the plans to build a refinery in Rajasthan, the ONGC executive said, it is separate from the pipeline project.

"If Cairn is hesitant to join the project then in that case there is nothing that constrains us from going ahead on our own."

Cairn expects to begin producing from Rajasthan by 2009. The fields - Mangala, Aishwariya and Bhagyam - have a targeted production of 150,000 barrels of oil per day. ONGC is a 30 per cent partner in the field.

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