Rajasthan demands refinery, oil firms want more sops

Barmer (Rajasthan), Aug 29 (Inditop.com) The Rajasthan government Saturday reiterated its demand for a refinery in the state, but Oil and Natural Gas Commission (ONGC) chairman R.S. Sharma indicated that the project would be economically unviable without attractive sops from the state.

“With oil production finally starting, it is our right that there should be a refinery here,” Rajasthan Chief Minister Ashok Gehlot said during a function to inaugurate production at Cairn India’s Mangala field, India’s largest oil discovery in two decades.

Prime Minister Manmohan Singh was the chief guest.

Gehlot urged that with the construction of a refinery, the under-construction pipeline could be used to transport foreign crude to be processed at the new facility and bring foreign exchange to the country. Gehlot pointed out that he had raised the matter with the prime minister too.

Setting aside his written speech, Petroleum and Natural Gas Minister Murli Deora admitted that the demand for a refinery had been raised several times by the Rajasthan government. “The PM has instructed me to consider it seriously and we will give it serious thought,” Deora said, amidst applause from the audience in the massive air-conditioned pavilion.

The chairman of the state-run ONGC told reporters that along with its partner, Cairn India, it had commissioned extensive studies to determine the economic viability of a refinery project.

“It was initially a joint request made by Cairn India and ONGC to get allocation of this crude with the objective of examining the feasibility for this refinery, and immediately ONGC had asked the experts to carry out the surveys,” he said.

Sharma pointed out that due to the heavy, waxy nature of Rajasthan’s crude, oil had to be imported for processing.

“And also, plateau (or peak production) period of the production is not very long. A refinery project takes 30-40 years,” he said.

The ONGC chief noted that the initial return as per the surveys was coming at just 1.5 percent.

“From the beginning, we were clear that the refinery will be done by a non-PSU entity through special purpose vehicle joint venture. As you know, unless viability is deemed bankable, it is difficult to find equity,” said Sharma.

He noted that in order to plug the “shortfall”, the state government had been asked to give special incentives.

“Also, each and every refinery has been conceptualised and constructed based on the fiscal incentive to be given by the state,” asserted Sharma, noting that the state government was now examining their proposals.

“We are in dialogue as of now. The ball is in the state government’s court,” he said.

The main operator, Cairn India also hinted that they were not looking at taking a decision on building a refinery in the short-term future.

“I hope that people of Barmer will understand that Cairn and ONGC are committed to bringing prosperity to the region, irrespective of whether a refinery is built here,” said Cairn India’s chief operating officer and managing director, Rahul Dhir.