Cairn plans 500 km pipeline with ONGC

The vexed issue of evacuation of Cairn's "waxy" crude oil from its fields in Rajasthan is likely to be resolved soon.

Putting aside the plan for setting up a greenfield refinery in the state, Cairn Energy India, in a joint venture with ONGC, is planning to build a 500-km pipeline to evacuate crude oil from the Mangala, Bhagyam, and Aishwarya fields.

Cairn was planning to invest an additional $500 million in the pipeline, sources said.

The company has already worked out the logistics of the plan to build an insulated pipeline from Barmer to Mundra port, since the waxy crude oil discovered in Rajasthan can only be transported in a heated pipeline.

The government's nominee for crude offtake from the Rajasthan fields, MRPL, will then transport the crude oil to its Mangalore refinery. MRPL's Mangalore refinery is the only one in the public sector currently equipped to process waxy crude oil.

The other refining options for Cairn India include Reliance's upcoming second refinery at Jamnagar in Gujarat, and the Essar group's recently commissioned refinery at Vadinar, also in Gujarat.

However, this would mean cancelling the existing production sharing contract (PSC) with the government and negotiating a fresh one. This, sources indicated, might not be possible.

The issue of crude offtake has been a major hurdle for the company, with MRPL asking for discounts on the price of the crude oil sold, given its quality.

Cairn, however, has refused to bring down its price from the $9 a barrel. Cairn had also toyed with the idea of entering the refining segment by setting up a refinery to process its production.