Cairn looks to PSUs to sell Rajasthan crude

Cairn India may end up selling crude oil from Rajasthan to a bouquet of public sector refiners including IOC, HPCL and BPCL as MRPL has indicated to the petroleum ministry that it would not be able to handle the entire output from Rajasthan.

However, Cairn is also in talks with the private sector refiners, Essar and Reliance for selling its Rajasthan oil.

Rahul Dhir, Cairn India CEO said, "We have spoken to the PSU refiners as well as the private sector refiners. We are now waiting for clarity from the government's side on who will buy the oil in what proportion."

Cairn's crude is likely to replace imported crude at BPCL and HPCL's Mumbai refineries.

The cost differential to both refiners would be in the range of $2 to $2.50 a barrel, Dhir added.

Recently, MRPL, the government nominee for the off-take of oil from Rajasthan, had told the ministry that it cannot refine the entire output from Cairn's fields given its capacity constraints.

MRPL said it can take only around 120,000 barrels a day, leaving Cairn to find customers for the remaining 30,000 barrels.

MRPL's plans to double its refining capacity are expected to be complete by 2010, a time-frame that Dhir said does not fit into Cairn's production plans.

The two companies however have agreed on jointly building the pipeline from Barmer in Rajasthan to Viramgam in Gujarat at a cost of $500 million, with Cairn as the majority shareholder footing 70 per cent of the cost.

Dhir said that the modalities are being worked out and that work on the pipeline would begin soon.

Cairn expects to begin production from its Rajasthan fields from December 2009 at 150,000 barrels a day.

The crude oil has already been benchmarked at 5-10 per cent discount to London Brent.

Dhir added that an expert has been appointed to determine the actual price at which the oil will be sold.