The Hindu Business Line : Cairn: Price discussions no constraint on production

Cairn India Ltd has said that the ongoing price discussion with the Government nominees for its Rajasthan crude is not a ‘constraint’ on production. “We are ready to produce. Crude output from the Rajasthan fields will begin shortly and price discussion is not a constraint to production,” a senior official said.

With the preparation for starting the oil flow from the fields by June end or early July in full swing and no conclusive decision on the crude price, apprehensions were being expressed in certain quarters that the company may delay production.

Mr Rahul Dhir, CEO, Cairn India, had said at the company’s analyst meet that “Pricing has to be based on the value of crude, which is driven by the chemistry of crude. Rajasthan crude is low sulphur, medium grade crude and, therefore, should be priced accordingly. We are ready to produce now, and price discussions will not prove to be a constrain.”

The company was looking at pricing its crude close to that of Nigerian bonny light. The company has proposed a three-year average of bonny light as the benchmark price.

The bonny light average prices for the calendar year 2008 was $100.9/bbl and for May 2009 – $59.3/bbl.

Allocation issue

On the issue of allocation of crude to the Government nominees, the official said, “The company is comfortable with the current allocation as it suits the initial production plan. However, the Government is looking to nominate more refiners to lift additional quantity of crude.”

The Government has nominated public sector refiners Hindustan Petroleum Corporation Ltd, Mangalore Refinery and Petrochemicals Ltd, and IndianOil Corporation to lift three million tonnes of the Rajasthan crude from the initial output.

During the initial two years of production (2009, 2010) HPCL will take 0.3 million tonnes, while MRPL and IOC will take 0.2 mt each. In the subsequent years 2011, 2012, HPCL will lift 0.5 mt, MRPL 0.4 mt and IOC 1.5 mt. Cairn is ready to commence production of crude oil from the Mangala field. The expected initial volume will be about 5,000-10,000 barrels of oil/day (bopd) which will reach to a production level of 30,000 bopd.

Transportation

The initial production will be transported through trucking from Barmer to the Kandla port. The cost of transportation is forecasted to range from $7 to $10 a barrel. To facilitate the trucking and sale of oil ahead of the pipeline completion, trial runs will be carried out on the route from Mangala to the Gujarat coast shortly.

Related Stories:
Reliance, Essar Oil keen on lifting Cairn’s Mangala crude
Tax issue may delay Cairn’s crude oil output from Barmer

More Stories on : Outlook | Petroleum | Cairn India Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page