New Delhi: An Empowered Committee of Secretaries (ECS) is likely to consider on February 22 Cairn India’s proposal to lay a $800 million pipeline for transporting crude oil from its vast Rajasthan oil fields and recovering the cost through sale of crude oil.
The ECS will consider shifting crude oil delivery point from the Rajasthan field flange to Salaya in Gujarat with the cost of laying the 585-km pipeline from Barmer to the new sale point including the field development cost that would be recovered by Cairn from sale of oil.
Official sources said the pipeline was necessitated after Mangalore Refinery - the official buyer of Rajasthan crude - said it can take only 1-1.2 million tonnes out of the 7.5 million tonnes output planned from the Rajasthan field.
MRPL would be denominated as the Government nominee for buying crude from the Rajasthan fields and Cairn would be given freedom to market the oil in India.
If ECS, comprising secretaries from finance, law and petroleum, agreed to the proposal, it may need to go to the Cabinet Committee on Economic Affairs for final consent.
Law Ministry, which was referred the issue, has already concurred to the proposal and finance ministry too is believed to have given no objection, sources said.
Oil Ministry had in 2006 mooted the idea of Cairn and its 30% partner ONGC laying the pipeline and claiming cost recovery by including it in field development cost. But it subsequently dragged its feet, giving Cairn approval to go ahead with acquiring right of user for the pipeline only in August 2007 but delayed the cost recovery approval.
In December it referred the issue to Law Ministry and later sought ECS nod.
Sources said in case of more delays in approval, Cairn may find itself very close to the point where it would have had to decide whether to proceed without cost recovery for the pipeline or to delay the date of first oil from Rajasthan.
Cairn-ONGC had originally targeted crude oil production from Rajasthan fields from first quarter of 2009, but this was pushed back by three months as the combine was unwilling to proceed on the pipeline unless the government allowed them to recover cost of the pipeline from crude oil sale.
Cairn’s Rajasthan field are more prospective today with peak output seen at 190,000 barrels a day (9.5 million tonnes), up from the previous estimate of 150,000 barrels per day (7.5 million tonnes) on new discoveries.