Barmer oil wells ready for production in a week: Cairn

JAIPUR: Cairn India has announced that it is ready to go for production within a week's notice even as the petroleum ministry is busy finalizing the price of the crude from the oil wells of Barmer in Rajasthan. Cairn India plans to start its production from Mangala field which will be the biggest crude oil basin with a potential to generate 1.25 lakh barrel per day by 2011.
According to Cairn India sources all arrangements have been completed for producing crude from the Barmer wells and the company is awaiting petroleum ministry's nod.
The reason for the delay is said to be the pricing of the product as the buyers of state-run oil companies Hindustan Petroleum, Indian Oil Corporation and Mangalore Refinery & Petrochemicals (MRPC), a subsidiary of the ONGC, have demanded a discount of about 11-12 % for the wet content in the crude. According to sources, the company is planning production of about 30,000 barrels of crude per day initially which will be transported to the Kandela port in Gujarat by trucks for processing.
Sources said the petroleum ministry has asked ONGC, which has a 30% stake in the company to settle all the pending issues. According to reports, discussions are on for pricing benchmarking. Cairn India has proposed Bonny Light' as the reference crude grade. In case a mutually acceptable price is not determined, a provisional price will be adopted for the initial period of production. Subsequently, the final price will be determined by experts, said a source.
The officials at Cairn Energy had a presentation with the top officials of the state government on Friday and according to company sources the state government is expected to earn a revenue of Rs 8 crore per day as royalty, once the production reaches its peak.
ONGC has been asked to expedite the Barmer crude price negotiations, which have been hanging for months. Sources said under normal circumstances, the crude price has to be finalized three months before production gets underway. However, in this case, Cairn India has failed to determine the price of its Barmer crude even when the oilfield is scheduled to become operational.
According to a Cairn India spokesman, "Pricing discussions are underway with the buyers. It is premature to speculate on pricing at this stage." Cairn India, however, is confident it will kick off supply of crude from its RJ-ON-90/1 oilfield in Barmer, Rajasthan, any time in June.