Government assures refiners for Cairn’s crude

Barmer (Rajasthan), Aug 29 ( The government Saturday sought to allay the fears of Cairn India, which started pumping oil from its Rajasthan fields, that it may not find enough refiners for its crude once the production reaches peak levels.

“The production sharing contract had enough contingency measures to cover all such issues,” Director General of Hydrocarbons V.K. Sibal told reporters at the launch of a new oil field here.

“We will ensure the crude is refined.”

According to Cairn, the peak output from its Rajasthan fields, including the Mangala wells that was inaugurated by Prime Minister Manmohan Singh Saturday, will amount to 175,000 barrels per day (bpd) – as much as 20 percent of India’s domestic production.

But the company has contracted with only two refiners at present – Indian Oil Corp and Mangalore Refinery and Petrochemicals Ltd (MRPL) – that have committed to refine only 60,000 bpd a day.

While Cairn India has a 70 percent share of the oil, state-run Oil and Natural Gas Corp will get 30 percent. The Rajasthan fields will together account for 20 percent of India’s production.

Cairn India chief executive and managing director Rahul Dhir said the company would not clamp down on production in fear of refiners not taking the crude.

“The government has always taken its decision well before time, which I am sure they will do in this matter too,” Dhir said, soon after the inauguration ceremony.

The Mangala field will start from a few thousands barrels now to 30,000 bpd this year, with peak output of 125,000 bpd expected by the middle of next year.

Cairn India is also laying a 700-km heated insulated pipeline to the Gujarat coast. Till it is complete, the crude will be transported by trucks. The first consignment will go to Indian Oil.

“We are building the pipeline without enough contracts for the crude,” Cairn chairman Bill Gammell said.

“When we started the business in India, there was no pipeline, there was no purchaser for crude. But the government has been steadfast with us,” he added.

Gammell said the pipeline was expected to be ready by year-end.