Oil JV to stop crude sale to Indian Oil

The joint-venture of BG group, Oil and Natural Gas Corporation and Reliance Industries Ltd operating the Panna-Mukta and Tapti oil and gas fields plans to discontinue crude oil sale from these fields to Indian Oil Corporation. The move comes on account of revenue loss being suffered by the joint venture.

"Indian Oil has not been paying us storage tanker rates for the past 10 years, which is just increasing the cost burden on us. There are many more issues with IOC, which is a government nominee for the Panna-Mukta fields, which are leading to revenue loss for us," an executive in the joint venture said.

The joint venture now wants to sell most of the crude oil to ONGC's subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL).

Sources said the partners had agreed to approach the government for removing IOC from the position of the government nominee for sale of Panna-Mukta oil. If the Ministry of Petroleum and Natural Gas agrees to the demand, BG-ONGC-RIL would be free to sell their crude oil to anyone they wish to.

Executives at ONGC said the company would rather sell its crude to its own refinery. Earlier, the situation was different, given that the MRPL came up in 2003.

BG-ONGC-RIL produces 36,000 barrels of crude oil per day from Panna/Mukta fields. The three partners would be entitled to crude oil proportionate to their shareholding. ONGC has 40 per cent interest in the joint venture, while BG and RIL have 30 per cent equity each.

"If the Panna/Mukta crude oil is supplied to MRPL, it will save about $ 3-4 per barrel on domestic crude vis-a-vis imported crude," an executive said.

Net savings from the decision not to supply to IOC and use ONGC's own refinery will range between $ 346 and 462 million for the oil produced from the fields. If Reliance decides to take its 30 per cent share to its Jamnagar refinery, the savings for 70 per cent of the oil will be about $ 242 to 323 million, the official said.

Officials said Reliance had not yet disclosed what it wants to do with its share of oil from Panna/Mukta fields, but BG was not interested in taking away its share and would be happy as long as it got the market price.

The Panna/Mukta fields are projected to continue producing crude oil till 2019.

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CUTTING OFF

The move comes on account of revenue loss suffered by the joint venture

The firms want to sell crude oil to ONGC's subsidiary, Mangalore Refinery and Petrochemicals Ltd instead