Reliance Industries Ltd, Essar Oil, and Indian Oil Corporation are likely to increase their crude oil offtake for the next fiscal from Cairn India-operated Rajasthan oil fields.
Currently, Reliance is purchasing about 80,000 barrels of oil per day (bopd), while IOC takes about 15,000-20,000 bopd and Essar almost 30,000-40,000 bopd, sources said.
Cairn reported a production of 125,000 bopd from Barmer in the last quarter and is now producing 150,000 bopd from two fields. Mangala can go up to 150,000 barrels of oil per day or 7.5 million tonnes (mt) annually, while Bhagyam has an approved peak of 40,000 bpd and can go up to 60,000 bpd with more investments.
Essar's expansion
With Essar increasing its refinery capacity from the present 16 mt to 18 mt by this month-end and 20 mt by end-September, the refiner is expected to buy more crude from Cairn.
Sources also said that Essar is looking at cutting down its sourcing from Iran by almost 10-15 per cent. Essar sources about 5 mt from Iran, and as an alternative if domestically produced crude is available, the refiner will go for it.
Heavy crude
Officials in the know of the developments said the refiners are looking for heavy crude – a type of crude oil which does not flow easily because of its density. Heavy crude oil resources in the world are said to be more than twice those of conventional light crude oil. Heavy crude are often priced at a discount to lighter ones. Rajasthan crude is very heavy and waxiness of the crude turns it into solid at room temperature.
The crude oil from Rajasthan is sold to the refiners at an average 10-15 per cent discount to Brent on the basis of prices prevailing. Brent average for the last fortnight has been $124 a barrel.
Sale to RIL
Meanwhile, Cairn has also been pursuing with the Directorate-General of Foreign Trade permission to sell its Rajasthan crude oil to Reliance Industries' second 29-mt refinery at Jamnagar, which is a SEZ refinery. Sources said that Reliance was looking at buying about 30,000 bopd of Cairn crude from this refinery.
Any sale to a unit in a Special Economic Zone is considered export and currently export of domestically produced crude oil is not allowed. The crude oil production in the country was almost stagnant up to 2009-10 owing to production from aging fields.
On commencement of crude oil production from new fields in Rajasthan by private and joint venture companies, output in 2010-11 increased 12.5 per cent at 37.69 mt compared to previous year's 33.50 mt.
With the country being a net importer, export of domestically produced crude oil is not permitted and only under special permits can it be done through state trading enterprise, Indian Oil Corporation.