Cairn India today said it has started selling crude oil from its Mangala oilfield in Rajasthan to private sector Reliance Industries and Essar Oil using a heated oil pipeline.
Till now Cairn shipped crude oil from the nation's most prolific on-land oilfield via road trucks to the Gujarat coast for onward transport to Mangalore Refinery and Jamnagar refinery of Reliance, Mangala crude's only customers till now.
The company has now completed a 590-km pipeline from the Thar desserts of Rajasthan to Salaya in Gujarat that has enabled the sale of crude oil to Essar's Vadinar refinery in the state.
Essar said it has received the "first batch of domestic Mangala crude oil through a dedicated heated and insulated pipeline system from oilfields in Rajasthan".
The 14 million tonnes a year Vadinar refinery has contracted 30,000 barrels per day of Mangala crude oil.
"The crude oil supply from Mangala will ramp up over the next few weeks and is expected to account for around 10 per cent of the total refinery intake," Essar Energy CEO Naresh Nayyar said in a company statement.
"Being heavy crude, Managla will meet part of our increasing requirements for heavy and tough crude oils, which should contribute positively to the refinery economics."
Cairn, which is currently producing around 60,000 bpd of oil from Mangala, said sale to Indian Oil Corp was expected to commence soon.
"The company and Oil and Natural Gas Corp (ONGC), its 30 per cent partner in the Rajasthan block RJ-ON-90/1, have commenced sales through the world's longest continuously heated and insulated crude oil pipeline," Cairn said in a press statement issued after trading on bourses closed.
The 590-km long Barmer to Salaya section of the Barmer to Bhogat pipeline (670 km) is now operational with oil supplies having commenced to the private refineries from the delivery point at Salaya.
"The completion of the pipeline and related infrastructure allows (it) to sell crude to the refineries in order to gradually increase both production and sales," the statement said.
While output from Mangala was close to 60,000 bpd, sales was only around 15,000 bpd with the rest being used to fill the pipeline.
"Pipeline sales are expected to reach 125,000 bpd in the second half of calendar year 2010 and sales arrangements with four buyers are now being put in place for 143,000 bpd," it said.
The Mangala field, which was discovered in January 2004, is the largest onshore oil discovery in India in more than 20 years.
Cairn said the construction to operation of the pipeline just took 24 months.
"Construction work is now set to commence on the Salaya to Bhogat section of the pipeline, on the Gujarat coast with completion targeted for 2011," the statement said.
The pipeline, whose cost has been included in the investment required for developing Mangala field, has been approved by the government.
Thar desert oilfields of Cairn started production in late August 2009. The company is currently producing about 60,000 barrels per day of crude oil from the Mangala oilfield, the largest among 24 oil and gas finds it has made in the Barmer district of Rajasthan.
With the completion of the pipeline, Cairn is now in a position to sell oil to Indian Oil Corp and Essar Oil, besides its current customers in Reliance and Mangalore Refinery.
Cairn currently sells about 15,000 bpd of oil to Reliance and MRPL while the rest of the current output is being used to linefill the pipeline.
The pipeline will help ramp up production from Mangala field to 125,000 barrels per day in second half of 2010.
The approved plateau production from Mangala, Bhagyam and Aishwariya - three main fields in Rajasthan - is 175,000 bpd or 8.75 million tonnes per annum but the company is targeting 240,000 bpd with increase in reserve base.
The proved and probable recoverable resource base in these fields is more than one billion barrel with another 1.9 billion barrels in 20 other fields.
It has tied up with four refiners to sell 143,000 bpd.
Cairn said two trains to process crude oil (remove impurities before sale to refiners) from the Mangala field are operational now and the third plant is due for completion by the end of the second quarter of 2010.
