Cairn seeks to export Rajasthan crude.

New Delhi, April 5: The petroleum ministry will soon have to decide whether to allow Cairn India to export crude from its Rajasthan fields as state-owned refiners are not keen on processing more than was allocated to them.

The Barmer fields are expected to produce 240,000 barrels of oil per day (bpd) much more than the earlier projection of 175,000 bpd. It is expected to reach its peak production by the end of 2011.

A senior oil ministry official said, “The government will have to revisit the issue of allowing export of crude output as refiners have expressed their inability to process the poor quality of heavy and waxy crude flowing from Cairn’s Rajasthan field.”

The country imports over 75 per cent of crude requirements and has so far prohibited exports of crude oil.

In a recent letter, BPCL told the oil ministry, “Domestic oil refineries are not in a position to process the newly-discovered oil. The high viscosity and pour point of domestic crude compared with imported crude oil become incompatible with refinery configurations and cannot be processed on a standalone basis.

“The demand for this crude will remain lower than its supply for the next two to three years and, therefore, it should be exported till such time when domestic refineries become capable of processing it independently,” it said.

The heavy and waxy Rajasthan crude can produce only small volumes of kerosene and diesel and it cannot produce LPG.

The Rajasthan block is now estimated to hold 6.5 billion barrels of oil, up from an earlier estimate of 4 billion barrels. The subsidiary of the UK-based firm plans to invest $2 billion over 2010-12 for the development of the field.

Peak output from the Thar desert fields would be next to the production from state-run ONGC’s Mumbai High fields off the western coast. Mumbai High, the nation’s largest oilfield, has a total production capacity of approximately 360,000 barrels of oil every day.

Sources said Cairn has asked the government to either provide additional nominations for the increased output from the block or allow the company to export.

Under the production sharing contract, officials said, the contractor had to sell crude to the government and its nominated refiners; if the government has to allow marketing freedom or export, it will have to notify that the country has attained self-sufficiency in oil production. The country imported crude oil worth $75.7 billion in 2008-09 compared with $67.8 billion in 2007-08.

The government has so far nominated Indian Oil, Hindustan Petroleum and Mangalore Refinery to buy the Rajasthan crude. It has also allowed Cairn to sell some quantity to RIL and Essar.

IOC and MRPL have been allocated 0.20 million tonnes each in 2009-10, while HPCL was offered 0.30 million tonnes. However, in the next fiscal, the offtake by the state refiner would be far less than the production from Rajasthan.

In 2010-11, IOC will buy 1.5 million tonnes of the crude, while MRPL will double its offtake to 0.40 million tonnes.

Source : telegraphindia.com