Reliance Industries wants to buy Cairn India's Rajasthan crude oil for processing at its only- for-exports Jamnagar refinery in Gujarat and has approached the government for its approval nod for the same.
RIL currently buys 80,000 barrels per day (bpd) or 4 million tonnes a year crude from Rajasthan, that it processes at its old 33 million tonnes a year domestic tariff area (DTA) refinery on the West Coast.
It has now applied to the government to buy another 30,000 bpd of Cairn crude for turning it into fuel at its 29 million tonnes SEZ (Special Economic Zone) refinery adjacent to the old unit.
Official sources said the company's request would be considered by the Board of Approval, headed by Commerce Secretary Rahul Khullar, next week.
Any sale to a SEZ or only-for-exports unit is considered outward shipment or exports out of India. The current policy does not allow export of domestically produced crude oil.
RIL's request comes just when Cairn is beginning to ramp up production from Rajasthan fields. Cairn currently produces 125,000 barrels per day from Mangala oilfield, the largest find in the Rajasthan block. Another 20,000 bpd is produced from Bhagyam fields.
Mangala can go up to 150,000 bpd or 7.5 million tonnes a year anytime now while Bhagyam has an approved peak of 40,000 bpd and can go up to 60,000 bpd with more investments.
Sources said Cairn currently sells 15,000-20,000 bpd to state-owned Indian Oil Corp (IOC) and another 30,000-40,000 bpd to Essar Oil.
RIL's refinery complex at Jamnagar, consisting of the old DTA refinery and an SEZ unit, are connected by a heated pipeline to the Mangala field in Rajasthan.
Rajasthan crude is very heavy with API (American Petroleum Institute) gravity between 25-30. Also, waxiness of the crude turns it into solid at room temperature. Transportation of the Rajasthan crude therefore, requires special heating arrangements in the pipeline to keep the crude in a liquid form. Most Indian domestic refineries lack the configuration to process Rajasthan crude due to its quality. Others face logistical issues.
Sources said RIL's SEZ refinery, which is designed to process far heavier crudes, is unable to use Rajasthan crude as the same has been classified as a restricted item under the current Foreign Trade Policy (FTP) provisions.
The unit has, therefore, sought approval of the BoA for the importing crude oil from Cairn India.