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Heavy crude oil set for exports, Cairn may gain

business Updated: Feb 22, 2010 22:42 IST
Anupama Airy
Anupama Airy
Hindustan Times
Cairn India

The case for exporting newly-discovered crude oil such as the one being produced by Cairn India from Rajasthan oilfields is gaining ground.

India being a heavy importer of crude oil has so far prohibited exports of crude oil. However, senior petroleum ministry officials said the case is being re-visted after some domestic oil refiners expressed their inability to process the poor quality of crude oil (heavy and waxy crude) being produced by Cairn India in Rajasthan.

“First it was Cairn India -- the producer of this crude oil –but now it is the users of this crude oil—state-owned oil refining companies such as Bharat Petroleum Corp Ltd (BPCL)--who have started advocating for the export of newly-discovered crude oil in the country,” said a ministry official.

A recent letter written by BPCL to the ministry clearly said, “The domestic oil refineries are not in a position to uplift the newly-discovered oil.”

“With high viscosity and high pour point, as compared to imported crude oil, domestic crude oil becomes incompatible with refinery configurations and cannot be processed on a stand alone basis. It has to be mixed in small proportions with imported crude oils for refining and processing.”

According to BPCL, the demand for this crude oil will remain lower than the supply for the next two-three years and therefore it should be exported till such time as domestic refineries become capable of processing it independently.

Moreover, due to the poor quality of crude oil, even Cairn India as a producer is unable to realise a better price.

“The price of this crude oil (by Cairn), when sold to domestic refineries is determined arbitrarily considering its poor quality,” said BPCL. “Proper pricing can be discovered only when crude oil is traded in the global market and the price is determined by sale to independent parties at an arm's length.”