MRPL in talks with HPCL to share Cairn Mangala crude

Vol 11, PW 20 (21 Feb 08) People & Policy

One of Basu’s most pressing tasks when confirmed as MD of MRPL will be to decide what to do with Cairn India’s crude from Mangala and other fields in Rajasthan.

MRPL is the government â€کnominee’ for Cairn’s Rajasthan crude but has made clear it can’t lift the entire amount, roughly equivalent to 5m t/y. “MRPL can buy only between 1m and 1.2m t/y of Rajasthan crude,â€‌ reports a source.

Where will the rest go PETROWATCH learns MRPL is in “active discussionsâ€‌ to sell the rest to Mumbai-based Hindustan Petroleum, which also has a refinery at Vizag port in Andhra Pradesh. “As of now MRPL is the only government nominee,â€‌ we hear.

“Cairn has talked to HPCL in the past about Mangala crude.â€‌ Why is MRPL talking to HPCL “Both companies are close to each other; they have a certain comfort level with each other.

â€‌ HPCL holds 16.95% equity in MRPL. Under discussion is a proposal that could see Mangala crude transported to HPCL’s 5.5m t/y refinery in Mumbai or its 7.5m t/y refinery at Vizag.

HPCL is carrying out technical studies to understand the qualities of the Cairn crude and any modifications required in its refinery configuration if it were to buy it. “Once these studies are through,â€‌ reveals a ministry source, “HPCL and MRPL will decide whether to take the entire crude themselves or to share it with other (state-owned) refiners.

â€‌ One thing is certain: “The first preference is for PSU (state-owned) refiners and there’s no question of this crude being exported outside the country.â€‌ Asks our source: “Why should it not be used in the country itself It is not every day you discover a significant crude source like this in your backyard.

â€‌ Ministry mandarins no longer see continued disagreement over the pricing formula for Mangala crude as a stumbling block. “There’s no hurry,â€‌ we hear.

“Under the PSC agreement is required six months before production.â€‌ Cairn expects to begin first production by mid-2009.