Cairn oil shines on IOC clean chit

'The crude oil is sweet, with very good properties'

Cairn India's crude oil in Rajasthan may be waxy, but is also found "to be sweet (high quality) with very good properties," according to an internal study done by the country's largest oil marketer and refiner, Indian Oil Corporation (IOC).

This is good news for Cairn as the study will temper the demand for discounts that prospective buyers of its crude have been seeking.

"The crude oil is sweet, with very good properties. The problem is about flowability and the high residue level," said a senior official in IOC, who did not want to be named.

The high residue level in the crude oil means that refineries will still ask for discounts because it affects the throughput from refineries, the IOC official said. Cairn expects the Rajasthan crude oil to be priced at 7 per cent discount to the Brent crude price, the global benchmark.

"If they can sell the crude oil at such low discount, it will be great. But we expect higher discount," another senior IOC official said.

There are 450 varieties of crude oil globally, with widely varying properties. A British Petroleum crude oil database says there are 31 varieties of crude oil more viscous than Cairn's Barmer oil. It also says that there are 94 crude oil varieties "heavier" than Cairn oil.

"We have always been maintaining that our Rajasthan crude oil is of good quality and benchmarked to many other varieties of oil produced in China and Sudan," said a Cairn spokesperson.

Crude oil is heated in distillation columns of refineries at various temperatures to get different petroleum products such as petrol, diesel, and LPG. The residue is left after a temperature of around 360 degree celsius is reached and various products have been taken out.

The residue is then put through advanced processes for further treatment such as fluid catalytic converters and delayed cokers to further break it into lighter products.

However, not all refineries in the country are equipped to process the Cairn crude oil. "IOC refineries can process that oil. We are putting up a delayed coker at our Gujarat refinery," the IOC official said. Other refineries such as Reliance's and Essar's in Gujarat also have the capability to process the crude oil.

A high wax content in Cairn oil creates a problem of coagulation of oil at normal temperature. That problem is however being solved with the petroleum ministry allowing Cairn to lay a special pre-heated pipeline from Rajasthan to the Gujarat coast to keep the oil flowing.