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Richa Mishra

New Delhi, Nov. 17

Cairn India Ltd (CIL) has approached the Petroleum Ministry to take an early call on the refineries it will nominate to lift Rajasthan crude. The company wants a clear picture, so that a decision on the valuation of crude can be taken before the production commences, official sources said.

Cairn, which follows the January-December financial year, is targeting second quarter of 2009 to start commercial production from its Barmer fields in Rajasthan. “Since the price of the crude is to be decided between the Government nominee/nominees and the contractor, it is important to have a clear indication,” sources told Business Line.

The production sharing contract (PSC) signed with the Union Government stipulates that the parities – the buyers and sellers – should meet six months prior to the commencement of commercial production, to establish an appropriate basket of crude oil to calculate the price.

Cairn India plans to produce 8.25 million tonnes a year of crude at its Barmer oil field. ONGC is a 30 per cent partner in the field.

Official sources said that “discussions on nominee refineries are going on.”

The situation arose since Mangalore Refinery and Petrochemicals Ltd (MRPL), which is the official nominee, has indicated that it can lift only up to 1.2 million tonnes. This has lead to the Government considering having more than one nominee.

While Indian Oil Corporation Ltd has said it can take up to two million tonnes of crude, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation can take up to one million tonnes each.

However, now MRPL has indicated that it can take more of Cairn’s crude if it is given higher quantity of ONGC’s Mumbai High crude for blending with Rajasthan crude.

Both Cairn and ONGC, as sellers, have agreed on a sellers’ benchmark offer price consisting of a basket of crude oils, whose blend is similar to the Rajasthan crude and which is actively traded in the international oil market and reported in Platts. The refiners are comparing Cairn’s crude with Maya (Mexican crude variety) or Ratawi (neutral zone), currently sold at a substantial discount.

The PSC 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.

More Stories on : Petroleum | Outlook | Cairn India Ltd

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