MPs to review Rajasthan refinery project tomorrow

New Delhi, June 27 (UNI) The possibility of setting up an oil refinery at Barmer in Rajasthan will be reviewed by consultative committee of MPs for the Petroleum ministry which meets here tomorrow.

After the discovery of an oil block by Cairn India, the government is yet to decide for building the refinery or pipeline to transport the crude which is likely to start flowing from early 2009. Whether the refinery can be built by this time is a moot point, sources said. However, the pipeline can be built in the given time-frame.

Oil and Natural Gas Commission (ONGC), which holds 30 per cent equity in the Barmer oil block with the remaining 70 per cent held by Cairn India, is looking at the option of building the refinery.

But in view of the short peak production of the Barmer field, which is likely to last just four years, the project would require laying a 500 km long pipeline for importing higher quantities of compatible balancing crude to the refinery location.

This and low demand of petro-products in Rajasthan, which was 5 million tonnes in 2005-06, has put a question mark on the economic viability of setting up the refinery. It will have to export a sizeable quantity of products because the growth prospects are estimated to be relatively low in Rajasthan, sources added.

In view of this scenario, ONGC has approached the Rajasthan government seeking a package of fiscal incentives to undertake the project. At the same time, the Indian oil major is also looking at the option of down-sizing the proposed refinery from 7.5 million tonnes per annum (MMTPA) to 4 MMTPA provided it is economically feasible. The techno-economic feasibility study is being carried out by Engineers India Ltd (EIL).

The refinery, sources said, would require a special configuration and that would involve higher investments to process heavy and waxy crude. Since it would depend on crude other than the Barmer oil, it would need a pipeline from a coast to transport imported crude, the sources added.

According to production-sharing contract, Cairn is obliged to sell the Barmer crude to the government-nominated company.

UNI