RIL close to buying crude oil from Cairn

Reliance Industries Ltd. | Refineries | Oil & Gas | BSE: 500325 | NSE: RELIANCE

05 Nov 2009 Evaluate

Reliance Industries (RIL) is close to striking a deal to buy crude oil from Cairn India's prolific Rajasthan oil fields and the first parcel may reach its Jamnagar refineries by the fourth week of November. Since the time government allowed Cairn to sell crude oil from its Rajasthan fields to private firms, it has been in dialogue with RIL.

A deal to sell seven parcels of 200,000 barrels each (cumulative 1.4 million barrels or 0.2 million tonnes) this year is about to be concluded, the source said. The oil will be shipped in trucks from the Barmer district fields to the twin refineries of RIL in neighbouring state of Gujarat. The first parcel may be sold as early as November 20, the source said.

Cairn is being forced to sell oil to private firms after the three public sector companies nominated to buy Rajasthan crude refused to take the entire output from the fields. This will be the first time ever that crude oil from a domestic field will be sold to a private refiner. So far, all the crude oil that is produced in India is consumed by PSU refiners.

The source said RIL will pay the same as the one agreed between Cairn and government-nominated buyers MRPL, IOC and HPCL. The government had previously nominated Indian Oil, Hindustan Petroleum and Mangalore Refinery and Petrochemicals for buying Rajasthan crude. But the three together have agreed to buy less than half of the targeted production this year.

The three refiners have committed to taking 0.7 million tonnes of output during the remainder part of the current fiscal and 2.4 million tonnes in the next year. But so far only MRPL has bought two parcels. HPCL had deterred while IOC says it can take crude only when a pipeline from Barmer to Gujarat coast for transporting the oil is build by early next year.

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