RIL, Essar to benefit from Cairn’s Rajasthan crude

Private refiners Reliance Industries and Essar Oil have become the biggest beneficiaries of Cairn India’s Rajasthan crude oil.

Till the third quarter of the current fiscal, Cairn has sold around seven million barrels to RIL for its domestic refinery at Jamnagar, about 6.9 million barrels to Essar for its Vadinar refinery, and around 3 million barrels to IndianOil Corp at an average price of $95.6 a barrel.

Rajasthan crude is sold at a 12.5 per cent discount to Brent, while the price at which Indian refiners have been sourcing crude oil has averaged at $105.56 a barrel for April 2013 till date. The Brent for the period has averaged at $107.63 a barrel.

At the time of deciding the Rajasthan crude oil price, the domestic refiners were comparing it with Maya (Mexican crude variety) or Ratawi (neutral zone), which were being sold at a substantial discount then because of the crude quality.

Sales agreement The current oil sales agreement expires on March 31. Cairn and its joint venture partner in the Barmer block in Rajasthan hope to renew the sales agreement with the existing buyers for the same or slightly higher volumes, sources said.

The price will also be at a substantial discount to Brent rates prevailing then.

Fresh buyers are unlikely to come in as most local refineries are not equipped to process the low sulphur crude with high wax content crude oil being produced at Barmer oil fields.

The domestic refiners have to blend it with other crude varieties for transporting and processing because of refinery configurations that restrict the use of all crude varieties. Besides, Cairn is not allowed to sell the crude to RIL’s second refinery in Jamnagar, as the latter is for exports.

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