IOC may take 2 mt of Cairn’s crude...

Indian Oil Corporation Ltd (IOC) has indicated that it could take about 2 million tonnes of the crude Cairn India plans to produce at its Barmer oil field in Rajasthan, as long as it is offered at a discount.

The public sector refiner is looking at a discount of up to $18 a barrel.

While IOC’s Panipat refinery could take 0.6 million tonnes of Cairn’s Barmer crude, its Gujarat refinery could take 0.8 million tonnes, IOC’s Director Refineries, Mr B.N. Bankapur, said. The commercial sale of Cairn’s Rajasthan crude oil is expected to begin from next year.

Cairn’s crude is being compared with Maya (Mexican crude variety) or Ratawi (neutral zone), currently sold at a substantial discount. IOC, which owns 10 of the 19 refineries in the country, has a total crude processing capacity of around 60 million tonnes per annum (mtpa). The discounts on Cairn’s crude could be anywhere between $15 and $18 a barrel, he indicated. “The Rajasthan crude has to be economically priced for us as we have to incur additional cost for transporting the crude, which turns solid at normal temperature,” he said.

Cairn India plans to produce 8.25 million tonnes of crude from its Barmer oilfield and is looking at State-run refiners for selling the oil. Currently, MRPL is the Government nominee to lift Cairn’s crude. However, since MRPL has indicated that it can only lift about 1.2 mt, the thinking was that the Government might consider more than one company.

On IOC’s naphtha exports, he said it will decline from the current level of about 2 mpta to around 0.6 mtpa by November 2009, when its naphtha cracker is commissioned at Panipat and will consume most of the product. “We will be using naphtha produced in Panipat and Mathura refineries for the cracker,” he said.

IOC is also looking at raising the quantity of high sulphur crude for processing at its refineries to save money on crude oil imports. High sulphur crude is available at a discount of $4-5 a barrel as compared to low sulphur crude oils. Currently, IOC refineries process 50 per cent of high sulphur crude, he said, adding that “we want to increase this up to 76 per cent by 2012 by upgrading our refineries.” IOC, which produces 6-7 mtpa of naphtha, is currently exporting around 2 mtpa. IOC’s Panipat refinery capacity is 12 mtpa, while that of Mathura is 8 mtpa.

Mr Bankapur said the company is planning to raise the capacity of Mathura refinery to 11 mtpa and that of Panipat to 15 mtpa. “We have approached the Ministry of Environment and Forest for clearance to expand our Mathura refinery,” he added.

Source: Business Line