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Richa Mishra

Refiners favour current mechanism of sale on nomination basis

New Delhi , Jan. 7

The Petroleum Ministry has turned down the request of Oil and Natural Gas Corporation (ONGC) to sell its output from Mumbai High fields to the refiners through market related price.

ONGC had approached the Ministry to auction its crude from Mumbai High. Official sources said that the Ministry has declined the request on the ground that if the company wanted to auction the crude, it should be the entire output from the fields and not just what is being sold to refiners. Besides, the price of the crude from Mumbai High fields was already discovered, hence what is the further advantage of this move was not clear, sources said.

Concern over proposal

The State-owned refiners such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation had also voiced concern over the proposal and wanted the current mechanism of crude sale to continue. Under the current system, the Ministry apportions 16 million tonnes of the Mumbai High crude to the refiners on a nomination basis, without allowing free market pricing.

Almost 40 per cent of the country's crude output is from these fields. The Mumbai High crude price is tagged to the Nigerian Bonny Light, but refiners get a discount ranging from of $1-$1.5 per barrel plus relief on customs duty, sales tax and sea freight.

Asked if the auction mechanism was allowed what would be the revenue gains for ONGC, sources said though it would largely depend on the prevailing crude prices, the crude could fetch ONGC at least $6 more per barrel, with refiners outbidding each other for the premium crude. The refiners also expressed concern that in the absence of deregulation of product prices, decontrol of crude prices would cost them dear.

Unanswered queries

ONGC wants to take the crude to its own refinery, MRPL. According to the oil refiners, a lot of questions need to be answered, including whether the auction mechanism would be only for State-owned refiners and what would be the pricing process before such a request is considered.

Most of the refiners are also into oil retailing and their losses would further increase as retail prices are controlled.

More Stories on : Petroleum | Policy | Oil & Natural Gas Corporation Ltd

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