IOC not keen on Cairn pipeline

The issue of evacuation of Cairn India's waxy crude oil from its Rajasthan oil fields has taken yet another turn with Indian Oil Corporation (IOC) saying it is ready to refine the crude oil but is unwilling to take part in its transportation.

Director (refineries) B N Bankapur said, "When the crude oil is brought to the doorstep of our refineries, we will take it in. But we are not going to take part in transportation of the crude oil."

He added that IOC is ready to process the crude oil at any of its refineries.

"We, however, want a discount on the crude oil from Rajasthan," he said.

IOC is seeking an 8-9 per cent discount (on the Indian crude oil basket price) in order to make Cairn's lower grade crude oil economically viable, an IOC official said.

A few months back, IOC offered to lay a pipeline from Barmer district in Rajasthan to its Panipat refinery.

"But talks broke down as they were unwilling to give us discounts," a company official had then said. Cairn's spokesperson David Nisbet said, "We are in continued discussions with the government and third parties for evacuating and processing the Rajasthan crude oil."

Cairn's Rajasthan crude oil, which comes onstream in 2009, has high wax content and needs specially heated pipelines for transportation. IOC officials say the low yield expected from the crude oil needs to be compensated by way of discounts.

Evacuation of Cairn's waxy crude oil is an issue since there is no clarity on how it will be evacuated and where it will be processed, though its partner in the field "" Oil and Natural Gas Corporation (ONGC) "" had also proposed a greenfield refinery in the state.

ONGC holds 30 per cent stake in the Rajasthan fields, while Cairn is the operator with 70 per cent stake.

Cairn's projections show that initial output of crude oil in 2009 will be around 100,000 barrels per day (bpd) peaking to around 150,000 bpd from 2010 to 2013.

From 2014 production will start to decline to a low of around 20,000 bpd by 2024.