ONGC, Cairn reach pact on Rajasthan pipeline

In a significant development, Oil and Natural Gas Corp and Cairn India have reached an agreement to build a $340-million pipeline to transport crude oil found in Barmer district of Rajasthan to Gujarat.

"Petroleum Ministry has blessed the idea of including the pipeline cost in the field development plan for the Rajasthan fields. Like the cost for developing Mangala, Bhagyam and Aishwariya fields, the pipeline investment will also be shared between Cairn and ONGC in a 70:30 ratio," an ONGC official said.

Cairn-ONGC will first build a 340-km line to Indian Oil Corp's (IOC) Viramgam pipeline terminal in Gujarat. Viramgam is connected by pipelines to IOC's Koyali, Panipat and Mathura refineries, which will be the potential customers of Rajasthan crude.

Smaller pipeline can be built to the coast, or Jamnagar where Reliance Industries and Essar Oil have refineries. The pipeline construction will take 12-18 months.

The official said ONGC plans to get its subsidiary MRPL de-nominated as the official offtake of crude oil found by Cairn Energy in Rajasthan and instead sell it to refiners.

"To include pipeline cost in FDP, the delivery point for crude oil will be shifted from field storage facilities to a location at or near the coast," he said adding the operator gets to recover cost incurred on field development through sale of oil before the Government gets its statutory dues.

Cairn/ONGC were in talks with various refiners to sell the Rajasthan crude, that will be sold at slight discount to Brent crude oil, he said.