Rajasthan refinery: ONGC proposes, govt disposes
State-owned Oil and Natural Gas Corp (ONGC) and the Rajasthan government are at loggerheads over fiscal incentives to set up the $3-billion refinery in Rajasthan.
By Piyush Pandey, TNN |
MUMBAI: State-owned Oil and Natural Gas Corp (ONGC) and the Rajasthan government are at loggerheads over fiscal incentives to set up the $3-billion refinery in Rajasthan.
ONGC has sought incentives from the state government and is banking on the same to make the refinery project viable. However, the state government is in no mood offer the sops.
“The development of the refinery is still on the cards, subject to economic viability, which depends on fiscal support by the Rajasthan state government,” a source in ONGC told ET.
“In this context, it will not be out of place to mention that while the Rajasthan government is saying that ONGC is demanding more fiscal benefits than what has been asked for by other refineries in other states, ONGC’s stand is that its fiscal demands are quite reasonable vis-à-vis the specific merits of this mega-project, and some state governments have given such benefits for projects of this specifications, to attract investment,” said the source without giving details of the fiscal incentives sought by ONGC.
Interestingly, former ONGC chairman Subir Raha, who is an advisor to the Rajasthan government, is in a difficult situation. As ONGC chairman, Mr Raha had persuaded the government to set up refinery, which received approval. Now, he is on the other side of the table and is pushing the government’s case, that ONGC is seeking more fiscal incentives to set up the refinery.
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When contacted, Mr Raha declined to comment anything on this issue. ONGC subsidiary Mangalore Refinery and Petrochemicals (MRPL) will set up this 7.5 MMTPA (metric million tonnes per annum) refinery with fiscal support from parent ONGC. In an e-mailed reply to a query by this paper, the ONGC official spokesperson said: “As on date, the estimated cost for the refinery, along with the pipelines, would be around Rs 12,000 crore. The as-built cost would be higher, and the economic viability depends on the amount of fiscal support from the Rajasthan government.”
With major oil discoveries by Cairn in Rajasthan, the state had proposed the refinery to process crude oil closer to the source of discovery. MRPL is also the government’s nominee to offtake Cairn crude. From zero date (finalisation of the incentive package from the Rajasthan government), the commissioning of the refinery would take at least four years (48 months), while Cairn’s crude oil will be available from early 2009 (next 18 months).
The government is sitting on Cairn’s Barmer-Viramgam pipeline proposal to transport Rajasthan crude to Gujarat and sell it to various refiners like Reliance, Essar, and Indian Oil through the pipeline. It could be also shipped
to MRPL’s refinery in Mangalore through the Gujarat port.
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Even as the government has so far failed to find a solution to offtake Cairn crude, the company is going ahead with its plans on the basis of producing 150,000 bopd. A Cairn India spokesperson said, “Cairn India is very confident of delivering 150,000 bopd as agreed with the Government of India. We have already started securing long lead items and are well-advanced to deliver first oil in 2009 therefore it is very important to finalise crude evacuation plans now.”
When asked about Cairn’s participation in the Rajasthan refinery, the ONGC source said, “Cairn had initially indicated interest to join as an equity partner, but has not pursued that. We understand that Cairn is in discussions and negotiations with various refiners for selling their Rajasthan crude.”
Cairn is said to have oil reserves of 3.6 billion with recoverable reserves above 650 million barrels. However, its commercial production schedule will depend on the government’s decision to allow it to go ahead with its pipeline plans or process it in Rajasthan. The pipeline will take 18 months from the date of getting approval and the refinery project will take 48 months.
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