ONGC-Cairn reach agreement on building Rajasthan pipeline

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New Delhi, Jan 14: In a significant development, Oil and Natural Gas Corp and Cairn India Ltd have reached an agreement to build a $340-million pipeline to transport crude oil found in Barmer district of Rajasthan to Gujarat.

“Petroleum ministry has blessed the idea of including the pipeline cost in the field development plan for the Rajasthan fields. Like the cost for developing Mangala, Bhagyam and Aishwariya fields, the pipeline investment will also be shared between Cairn and ONGC in a 70:30 ratio,” an ONGC official said.

Cairn-ONGC will first build a 340-km line to Indian Oil Corp’s (IOC) Viramgam pipeline terminal in Gujarat. Viramgam is connected by pipelines to IOC’s Koyali, Panipat and Mathura refineries, which will be the potential customers of Rajasthan crude. Smaller pipeline can be built to the coast, or Jamnagar where Reliance Industries and Essar Oil have refineries.

The pipeline construction will take 12-18 months.

The official said ONGC plans to get its subsidiary MRPL de-nominated as the official offtake of crude oil found by Cairn Energy in Rajasthan and instead sell it to refiners.

“To include pipeline cost in FDP, the delivery point for crude oil will be shifted from field storage facilities to a location at or near the coast,” he said adding the operator gets to recover cost incurred on field development through sale of oil before the Government gets its statutory dues.

Cairn/ONGC were in talks with various refiners to sell the Rajasthan crude, that will be sold at slight discount to Brent crude oil, he said.

When contacted, Cairn spokesperson David Nisbet said: “We are involved in ongoing discussions with the Government and third parties.”

The official said the Rajasthan crude can be processed at Reliance’s existing 33 million tonnes Jamnagar refinery or its upcoming 29-million-tonne refinery at the same site, Essar’s Vadinar refinery, IOC’s expanded Koyali refinery in Gujarat or Panipat refinery in Haryana.