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Our Bureau

Transportation of crude from its Rajasthan fields

New Delhi March 27 All uncertainties pertaining to the proposed pipeline to transport the crude from Cairn India's Rajasthan fields, which was crucial for the field to be developed on time, seem to be coming to an end.

Cairn India said on Tuesday that it was willing to bear the major part of the cost involved in building a pipeline to transport crude from its Rajasthan fields.

"It is proposed that the pipeline will fall within the definition of the field development activities and will accordingly be funded 70 per cent by Cairn India and 30 per cent by ONGC," Mr Rahul Dhir, Cairn India CEO, said.

Crude Evacuation

By resolving this issue, Cairn's crude can access domestic refineries. Lack of clarity on commercial issues such as crude evacuation from the fields, crude quality and pricing of the crude were some of the issues that have been adversely affecting the company's performance in the domestic stock market.

The company's share price at the BSE today moved up to Rs 126.95 after opening at Rs 125 and it finally closed at Rs 125.95. Speaking to Business Line soon after the parent Cairn Energy announced its results, Mr Dhir said, "We are getting closer to a solution on the evacuation of crude with ONGC and Government. We hope to reach a solution by the middle of the year (June)."

Oil Production

Cairn and ONGC plan to lay a 600-km pipeline from Barmer, Rajasthan to the Gujarat coast at an estimated cost of $700-800 million. The pipeline is proposed to have a connecting point to Indian Oil Corporation's terminal in Gujarat from where the crude can be carried to its Koyali and Panipat refineries. The pipeline will take 12-15 months for construction and will come up around the same time when the Rajasthan field begins oil production in 2009, he added.

On the issue of hunt for alternative buyers for the crude with MRPL, the Government nominee seem to be reluctant to do so, he said, "Our mandate is to sell it to the Government nominee MRPL. Hence, in our discussions we have been talking about public sector companies like Bharat Petroleum and Hindustan Petroleum as the alternative buyers for the crude."

Oil Sales

However, it has also been suggested that if the Government permits, others could also be considered like Reliance Industries Ltd and Essar Oil. Cairn is likely to make an application for the right of use for the pipeline shortly. "Cairn India and ONGC are continuing discussions on the approach to pricing of the Rajasthan crude," Mr Dhir said adding that his company will be the operator of the pipeline.

Cairn is geared up to start production in small quantities from its Saraswati field and it is waiting for finalising of oil sales.

In another 12 months, it can put Raageshwari oil field to production but the giant Mangala field would come in 2009.

This is when output peaks to 1,50,000 barrels per day. "For best results, the pipeline has to be treated in consistency with the upstream development plan — include the pipeline in the field development cost and allow cost recovery from sale of crude oil," he said.

According to the company, Cairn's Rajasthan oil reserves exceed 3.6 billion barrels. Cairn Energy today reported a loss of $82 million for 2006, compared with a profit of $79.1 million in 2005.

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