New Delhi: The government is toying with an idea of setting up a refinery in Rajasthan to process crude oil found by Cairn, a proposal that may result in a three-year delay in starting production and cause a loss of nearly $5 billion (Rs 20,000 crore) to the exchequer.
Cairn India, which made the nation’s biggest oi is set to produce 7.5 million tonne from early-2009. But Petroleum Ministry now wants output cut to half and ONGC/MRPL - the official buyers of the crude - to build a 4 million tonne a year refinery, a top official said.
Even though the Rs8,000 crore refinery will take at least four years to build, the ministry has withheld approval to build a pipeline to take the crude to refiners in Gujarat.
The ministry has asked oil regulator DGH to look at prolonging the 150,000 barrels per day output for 8 years to at least 15 years by reducing it to 80,000 barrels per day.
The new proposal, if accepted, will not only slash crude oil output but also result in decline in the government’s share in revenues from the field to $3.9 billion from $6.88 billion previously estimated.
Corporate tax will dwindle to $1.054 billion from $1.913 billion and royalty will dip to $1.316 billion from $2.372 billion previously estimated. In all, total revenue to the government is projected to decline to $6.27 billion from $11.16 billion earlier -- a loss of nearly $5 billion.