Reliance postpones crude oil delivery to CPCL

Reliance postpones crude oil delivery to CPCL

New Delhi: Reliance Industries has put off delivery of crude oil from its eastern offshore Krishna Godavari basin D6 block to Chennai Petroleum Corp. (CPCL) by almost two months to 15 February due to equipment failure at the oilfield.

Reliance, which last month sold its first shipload of oil from MA-1 oilfield in the predominantly gas-rich D6 block to Vizag refinery of HPCL, was to deliver the second consignment to CPCL on 23/24 December.

“They (Reliance) have told us that the shipment will reach us around 15 February," CPCL Managing Director K.K. Acharya said.

MA-1 field started crude oil production in September but on 9 December it was shutdown for three to four weeks following pipe rupture at the floating, production, storage and off-loading vessel (FPSO).

CPCL has contracted 450,000 barrels of oil from Reliance at a discount of $5.34 a barrel to the internationally traded price of Nigerian Bonny Light crude oil.

The price is the same what Hindustan Petroleum Corp Ltd (HPCL) paid for the first consignment, Acharya said. CPCL was interested in entering into long-term contract for buying MA-1 crude but the pricing can be settled only after the refinery is able to process the first consignment to know of the characteristics of oil.

After the shutdown at MA-1, Reliance had offered to sell 300,000 to 320,000 barrels of oil to CPCL and informed the company that if it wanted the full contracted quantity it would have to wait till February for producing the remainder quantity after the field restarts production.

CPCL has opted to wait.

Sources said output from MA-1 field before the shutdown was erratic with more than expected natural gas flowing out of well along with crude oil. Production from the field varied on daily basis, sometimes falling to as low as 8,000 barrels per day and then suddenly rising to 12,000 bpd.

Crude oil from the MA-1 field is stored on a FPSO vessel at the well-head and once critical volumes are reached it is transferred to a ship for transportation to a refinery.

Reliance had last month sold the first consignment of 59,000 tonnes of oil from the field to Vizag refinery in Andhra Pradesh at $5.34 a barrel discount to Nigerian crude grade Bonny Light.

Oil and Natural Gas Corp, India’s largest crude oil producer, also benchmarks its prime Mumbai High crude at this grade.

Both Vizag and Chennai refineries have evinced interest in taking the entire peak output of 40,000 bpd (2 million tonnes a year) of sweet crude on a long term basis. The peak output was envisaged in second calendar quarter of 2009 and in all likelihood, Reliance may split the volumes equally between the two, sources said.

Reliance is the operator with a 90% stake in the 7,645 square km D6 block, off the Andhra coast. Niko Resources of Canada holds the remaining 10% interest.

The company, which had budgeted $1.5 billion for developing the oil field, has till now spent $950 million and would invest the remainder in drilling and tying in four additional wells.