NEW DELHI: Cairn India has approached
DGFT seeking permission to sell its Rajasthan crude oil to Reliance Industries' SEZ refinery at Jamnagar in Gujarat without going through state canalising agency, IOC.
As per present policy, any sale to a unit in a Special Economic Zone is considered export. With country being a net importer of crude oil, export of domestically produced crude oil is not permitted and only under special permits can it be done through state trading enterprise, Indian Oil Corp (IOC).
Cairn currently sells 80,000 barrels per day or 4 million tons a year of crude from Rajasthan to RIL's domestic tariff area (DTA) refinery at Jamnagar. As output from Rajasthan is set to rise, it now wants to sell the oil to RIL's adjacent only-for-exports or SEZ refinery.
Sources privy to the development said RIL's request for buying 30,000 bpd of Cairn crude at its 29 million tons SEZ refinery was considered by Board of Approvals, headed by Commerce Secretary Rahul Khullar on March 13.
But a decision was deferred during pendency of Cairn's separate application to Directorate General of Foreign Trade (DGFT) for effecting exports of Rajasthan crude without going through IOC.
Any sale to a SEZ or only-for-exports unit is considered outward shipment or exports out of India. The current policy does not allow export of domestically produced crude oil.
Cairn currently produces 125,000 barrels per day from Mangala oilfield, the largest find in the Rajasthan block. Another 20,000 bpd is produced from Bhagyam fields.
Mangala can go up to 150,000 bpd or 7.5 million tons a year anytime now while Bhagyam has an approved peak of 40,000 bpd and can go up to 60,000 bpd with more investments.
Sources said Cairn currently sells 15,000-20,000 bpd to IOC and another 30,000-40,000 bpd to Essar Oil.
RIL's refinery complex at Jamnagar, consisting of the old DTA refinery and an SEZ unit, are connected by a heated pipeline to the Mangala field in Rajasthan.
Rajasthan crude is very heavy with API ( American Petroleum Institute) gravity between 25-30. Also, waxiness of the crude turns it into solid at room temperature. Transportation of the Rajasthan crude therefore, requires special heating arrangements in the pipeline to keep the crude in a liquid form. Most Indian domestic refineries lack the configuration to process Rajasthan crude due to its quality. Others face logistical issues.
Sources said RIL's SEZ refinery, which is designed to process far heavier crudes, is unable to use Rajasthan crude as the same has been classified as a restricted item under the current Foreign Trade Policy (FTP) provisions.
Source : economictimes.indiatimes.com