Cairn gets nod for pipeline funding plan

An empowered committee of secretaries (ECS) has cleared Cairn India's proposal to recover the cost of the $700-million pipeline from its Rajasthan fields to the Gujarat coast through sale of crude oil from the field.

"The ECS has allowed the pipeline cost to be included in the field development cost of the Rajasthan field," said a senior government official. The ECS decision is likely to go to the Cabinet Committee on Economic Affairs for final clearance.

Cairn is laying a pre-heated 585-km pipeline to transport its "waxy" crude oil from Barmer in Rajasthan to Salaya in Gujarat from where it will be transported to various refineries.

The government allows a company to recover the investment in developing an oil or a gas field through oil sales. Once the company has recovered the costs, the government starts taking a share of the profits from oil sales.

The field extends to the point of delivery of oil. The ECS decision will shift the point of delivery from Rajasthan to the Gujarat coast.

A Cairn executive said they had not received the final word from the government. He added that all major contracts for laying the pipeline and developing the field had been awarded. "We remain committed to producing oil from Rajasthan in the second half of 2009," the official said.

The pre-heated pipeline became necessary after . Refinery and Petrochemicals Ltd (MRPL), the official buyer of the crude, said it could take only around 1 million tonne (mt) out of the projected 7.5 mt output.

The oil has to be transported through a heated pipeline as this "waxy" oil coagulates at normal temperatures.