Cairn wins cost recovery duel with ministry

Vol 16, PW 15 (21 Feb 13) People & Policy

After a frustrating two-year wait, Cairn India has finally won the right to recover the cost of two spur pipelines from its Rajasthan oilfields.

On January 21 Cairn officials met then oil secretary Girish Chaturvedi to remind him about a pending proposal to recover the $26m costs of spur pipelines to Reliance and Essar’s refineries at Jamnagar in Gujarat. “Chaturvedi was shocked that this matter is unnecessarily pending,” says a ministry official.

“He asked (joint secretary exploration Aramane) Giridhar to clear this matter on a priority basis.” Since then junior oil ministry officials have begun preparing a note for the Management Committee for block RJ-ON-90/1, recommending that the capital expenditure for the spur pipelines be included as a revision to the Field Development Plan.

“It may be noted that the RJ-ON-90/1 development plan has been approved by the MC,” says the ministry’s note. “But there is also a provision to revise the work programme and budget (which means the spur pipelines can be included).

” Cairn is supplying 135,000 b/d to the Reliance and Essar refineries at Jamnagar in Gujarat through 30-km spur pipelines branching out from its 20-inch diameter, 580-km trunk pipeline from Barmer in Rajasthan to Salaya in Gujarat. Under a ministry directive issued in October 2008, Cairn was meant to supply crude from Rajasthan only to state-owned companies IndianOil, Bharat Petroleum, Hindustan Petroleum and ONGC subsidiary Mangalore Refinery and Petrochemicals (MRPL).

But these companies didn’t want all of Cairn’s estimated 7.5m t/y to 8.75m t/y oil production and could only take 3.5m t/y. This meant Cairn was forced to turn to private sector customers to sell the balance oil production.