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Cairn may be allowed to export Rajasthan crude

The government is planning to allow export of crude oil from the Rajasthan oil fields of Cairn Energy India, reports Anupama Airy.

business Updated: Jan 25, 2009 20:42 IST
Anupama Airy

The government is planning to allow export of crude oil from the Rajasthan oil fields of Cairn Energy India.

If this decision goes through, it will be a landmark as under existing rules, export of crude oil from India, which imports almost 80 per cent of its crude oil requirement, is not permitted.

Cairn Energy — which will shortly begin crude oil production from its Barmer oil fields in Rajasthan — may be made an exception. This is because the state-owned oil refineries — Indian Oil, BPCL, HPCL and MRPL, the government's nominees of this crude oil have expressed their inability to lift the entire production of Cairn's crude oil, which is of heavy quality with high wax content.

Out of its annual production of 8.75 million tonnes of crude oil, Cairn has got assurances for only 5.2 million tonnes from the public sector oil refineries for its Rajasthan crude. This leaves it with about 3.5 million tones per annum of crude, for which a buyer has to be found.

From the private sector, Essar Oil has shown interest to take about three million tones of crude annually. However, the concern of Cairn is that if they do not have the option to export the crude, they will run into the risk of a potential lower negotiating leverage with private refineries on commercial terms, revealed a senior petroleum ministry official.

“There appears to be no other option but to allow marketing freedom to Cairn for sale of the balance quantity of crude. We have already proposed that Cairn be allowed to sell to the private sector refineries as also be given the option to export.”

The official, however, said the export option shall be subject to the condition that the net back-price realised from the export will be equal to or higher than the price that a private refinery is willing to pay for the purchase of the balance crude oil.

The highest price at which Cairn sells its crude oil will be used to calculate the government’s share of profit from the petroleum sale.