The Hindu Business Line : MRPL examining alternatives for benchmarking Cairn’s crude

New Delhi, July 11 Even as clarity seems to be emerging on how Cairn India’s Rajasthan crude will be evacuated, Mangalore Refinery and Petrochemicals Ltd (MRPL), which is the Government nominee to process the crude, is looking at alternative options other than Indonesian crude basket proposed by Cairn-ONGC for arriving at a crude price.

Sources told Business Line that Cairn-ONGC has proposed a combination of Duri (58 per cent) and Widhuri (42 per cent), which are understood to be heavy and waxy in nature. Besides, both the varieties are said to see major volatility as they are not heavily traded leading to a lot of variation in pricing, sources said adding that “Therefore, MRPL is examining other alternatives available, to reach an appropriate price.”

Prices

According to an international consultant, KBC, the crude could be priced at $58.30 a barrel based on the combination of Duri and Widhuri. The production sharing contract signed with the Government requires price to be fixed by references to a basket of free-on-board crude adjusted for differences in quality, delivery time, quantity, and payment terms.

Lifting crude

MRPL has informed the Government that it can lift only up to 1.2 million tonnes (mt) of crude oil from the field and not the entire quantity. It had said that it is not in a position to lift the whole crude oil from the field as it requires blending with lighter crude oil in order to make it acceptable for processing.

Recently, a clear picture seems to be emerging on the issue of delivery point. It is now been suggested that a pipeline could be built to coastal Gujarat. The capital expenditure for the construction of pipeline to Vadinar a $1 billion is to be jointly shared between Cairn and ONGC equivalent to their stake in the block (70:30), sources stated.

Indications are that the Ministry is likely to favourably consider giving its nod to permit the contractors to make pipeline construction as part of the field development plan. The first oil from Rajasthan oil block (RJ/ON-90/1 block) is expected to spurt in 2009. The fields-Mangala, Aishwariya and Bhagyam have targeted a production of 1.5 lakh barrels of oil per day.

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