ONGC shelves refinery plans in Rajasthan

Shirish Nadkarni
OGJ Correspondent

MUMBAI, July 17 -- India's state-owned Oil & Natural Gas Corp. (ONGC) has placed on hold plans to build a 7.5 million tonne/year refinery near Barmer to handle crude oil produced in Rajasthan state, citing costs estimated at $1.96 billion.

Rajasthan crude would be available for only a limited period, ONGC said, and the cost of importing crude for an inland refinery would be prohibitive.

The company said it could instead transport the heavy, waxy crude from Rajasthan to a subsidiary, Mangalore Refinery & Petrochemicals Ltd. (MRPL), for processing in India's southern Karnataka state. ONGC proposes a specialized pipeline to Mundra port in Gujarat for further shipment to MRPL's refinery.

ONGC is negotiating a long-term sales and supply agreement between MRPL and Cairn Energy PLC, Edinburgh, its partner in an oil and gas block in Rajasthan. Cairn operates the block, holding a 70% share, while ONGC owns 30% (OGJ, Jan. 23, 2006, p. 35).

ONGC is seeking concessions from Cairn, including a $4-5/bbl discount on the crude, arguing that it would otherwise be uneconomical to transport it to MRPL. Cairn, however, wants an international price. It expects first production of 150,000 b/d of oil at yearend 2008.

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