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Rediff.com  » Business » Cairn may evacuate oil through Gujarat

Cairn may evacuate oil through Gujarat

January 10, 2007 09:33 IST

Cairn India is actively considering the option of evacuating its crude oil from Rajasthan through Viramgam in Gujarat, where PSU oil marketer Indian Oil Corporation has a tank farm. IOC also has a pipeline connecting the tank farm to its Koyali refinery 114 km away.

Cairn India CEO Rahul Dhir said the company might also consider selling its crude oil through IOC. However, he said it would be the government that would take the final call on who would be the off-taker for Cairn's Rajasthan crude oil.

Mangalore Refinery and Petrochemicals, an ONGC subsidiary, is the government nominee for the crude oil off-take so far. However, with MRPL expressing its reluctance to invest in a pipeline to evacuate crude oil, Cairn has been exploring other options.

Cairn needs 12 to 15 months to complete the pipeline for evacuating the crude oil and getting it to a refiner.

Lawrence Smyth, the company's chief operating officer, said, "We need 12 to 15 months to complete the pipeline and we are hopeful that by the middle of the year, we will have a solution to the issue. We are open to any solution whether it is a joint venture, a special purpose vehicle or a consortium for building the pipeline."

The pipeline, in the case of Rajasthan, is crucial, as crude oil is waxy and has to be transported through a specially heated pipeline.

The cost of the pipeline has been estimated at $1 million a km. Once the Rajasthan production goes onstream in the last quarter of 2008-09, the company's total oil production will go up five-fold to 150,000 barrels per day (bpd) from the current 25,000 bpd at a well-head cost of $10 a barrel.

However, the price at which Cairn will sell its oil to the government is yet to be worked out, said Lawrence Smyth. Cairn sells its current production from Ravva and Cambay at a premium of a dollar and a half to London Brent.

"We have invested over $1.5 billion in India with our joint venture partners, and are planning to spend another $1.5 billion in exploration and development activities in India over the next three years," Smyth said.

Gayatri Ramanathan in Mumbai
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