The Oil Ministry has asked the Law Ministry to examine whether Cairn India and flagship explorer ONGC, its 30% partner in the Barmer fields, should be allowed to recover from oil sales nearly $700 million they propose to spend on a pipeline for carrying crude from the combine's Rajasthan fields, sources said.
The 585-km pipeline from Barmer to Salaya near the Gujarat coast is estimated to take at least 18 months and the Oil Ministry's move could derail the combine's plans to start pumping oil from Barmer in the first quarter of 2009.
Oil Ministry officials, however, say a reference to the Law Ministry is required on two counts. First, it can open precedence for other companies such as Reliance Industries to lay similar claims with regard to their oil/gas evacuation infrastructure.
Second, the government will own the pipeline once the companies recover their cost. The catch is that the government will have no use for it after 8-10 years, which is the Barmer field's life.
The pipeline has been designed especially for the waxy crude from Rajasthan and will have in-built heating mechanism. This fact gets accentuated when one considers that Hindustan Petroleum is also laying a crude-carrying pipeline - which almost runs parallel to the Cairn pipeline - to feed its proposed Bhatinda refinery barely 30 km from the Barmer fields.
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On the quality of this oil from Rajasthan:
Business Standard
Cairn India’s crude oil in Rajasthan may be waxy, but is also found “to be sweet (high quality) with very good properties,” according to an internal study done by the country’s largest oil marketer and refiner, Indian Oil Corporation (IOC).
This is good news for Cairn as the study will temper the demand for discounts that prospective buyers of its crude have been seeking.
“The crude oil is sweet, with very good properties. The problem is about flowability and the high residue level,” said a senior official in IOC, who did not want to be named.
The high residue level in the crude oil means that refineries will still ask for discounts because it affects the throughput from refineries, the IOC official said. Cairn expects the Rajasthan crude oil to be priced at 7 per cent discount to the Brent crude price, the global benchmark.
“If they can sell the crude oil at such low discount, it will be great. But we expect higher discount,” another senior IOC official said.
There are 450 varieties of crude oil globally, with widely varying properties. A British Petroleum crude oil database says there are 31 varieties of crude oil more viscous than Cairn’s Barmer oil. It also says that there are 94 crude oil varieties “heavier” than Cairn oil.
“We have always been maintaining that our Rajasthan crude oil is of good quality and benchmarked to many other varieties of oil produced in China and Sudan,” said a Cairn spokesperson.
Crude oil is heated in distillation columns of refineries at various temperatures to get different petroleum products such as petrol, diesel, and LPG. The residue is left after a temperature of around 360 degree celsius is reached and various products have been taken out.
The residue is then put through advanced processes for further treatment such as fluid catalytic converters and delayed cokers to further break it into lighter products.
However, not all refineries in the country are equipped to process the Cairn crude oil. “IOC refineries can process that oil. We are putting up a delayed coker at our Gujarat refinery,” the IOC official said. Other refineries such as Reliance’s and Essar’s in Gujarat also have the capability to process the crude oil.
A high wax content in Cairn oil creates a problem of coagulation of oil at normal temperature. That problem is however being solved with the petroleum ministry allowing Cairn to lay a special pre-heated pipeline from Rajasthan to the Gujarat coast to keep the oil flowing.
Oil and Natural Gas Exploration in Rajasthan
Rajasthan has four sedimentary basins potential for hydrocarbon deposits:
Rajasthan Shelf Basin: Jaisalmer and part of Bikaner District
Bikaner-Nagaur Basin: Bikaner,Nagaur, Ganganagar and Churu District
Vindhyan Basin: Dholpur, Karoli, Baran and parts of Bundi and Sawai Madhopur Districts
Barmer-Sanchore Basin: Barmer and Jalore Districts
Exploration work is going on in the following four blocks by multinational companies:
Barmer-Sanchore Shell India \Cairn Energy
Bikaner-Nagaur Essar Oil Ltd. with Polish Oil & Gas Co.
Shahgarh Phoenix Overseas with Russian Oil & Gas Co.
Bangewala area Oil India Limited in agreement with PDVSA of Venezuela
