Cairn chooses HPCL over IOC for CB-OS/2 crude

Vol 17, PW 20 (22 May 14) Midstream & Downstream

To save costs, Cairn India has replaced IndianOil with Hindustan Petroleum as buyer of crude from its offshore Gujarat block CB-OS/2.

Cairn began oil deliveries from the Lakshmi and Gauri fields at CB-OS/2 to HPCL in early April, transporting oil by road in trucks from its Suvali receiving and processing terminal to Hazira just 7-km away. At Hazira the oil is stored in storage tanks hired from Adani Group.

“Cairn tells HPCL when enough oil has accumulated," says a source. HPCL then transports the oil by sea to its 6.5m t/y Mumbai refinery in the Chembur suburb.

HPCL has received two cargoes so far, each of 20,000 tonnes. A third cargo is expected by June.

“One cargo is expected every 30 or 40 days,” says HPCL. Cairn and CB-OS/2 partners ONGC and Tata Petrodyne pay for transportation from Suvali and storage at Hazira while HPCL pays for transportation from Hazira to Mumbai.

Cairn used to transport the oil 170-km by road to Gandhar for storage in ONGC tanks before onward transportation by pipeline to IOC's Koyali refinery. "But the road journey was unsafe," says a CB-OS/2 source.

"ONGC wanted its Gandhar tanks for its own use,” he adds, “so we needed an alternative.” Importantly, the cost of transporting oil to Koyali was not recoverable, whereas HPCL covered the transport costs from Suvali to Hazira.