Cairn India may have to sell its crude from the Barmer fields in Rajasthan

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at a discount of $16-18 a barrel to the Bombay High crude, which is benchmarked to Bonny Light. Indian Oil Corporation that owns 10 of the country’s 19 refineries with a combined refinery capacity of 60.2 million tonne wants the discount since Cairn’s crude is waxy and heavy in nature.

“We are ready to take the crude provided it is economically priced. After research and development, we have estimated that we can substitute maximum 10 per cent of the crude in our pipeline with the Rajasthan crude”, Indian Oil Corporation director (refinery) BN Bankapur told reporters. He said its pipeline system could take around 1.5-2 million tonne Rajasthan crude.

Cairn had recently increased its production estimate to plateau rate of production from the three proven Rajasthan fields. Mangala, Bhagyam and Aishwariya--to 175,000 barrels of oil per day (bopd) from the previously forecast figure of 150,000 barrels of oil per day.

IndianOil is also upgrading its processing facilities for handling high sulphur crude. High sulphur crude at present comprises 60-70 per cent of its total crude requirement. The share of high sulphur crude will increase to 76 per cent by 2012 with the commissioning of Paradeep refinery.

High sulphur crude is $4-5 a barrel cheaper than sweet crude. “New discoveries are all high sulphur and heavy crude,” he said. The company’s Haldia and Panipat refineries would be capable of processing 80-90 per cent high sulphur crude while Gujarat and Panipat will be able to use 60-72 per cent. “Except at Barauni and Digboi crude, all refineries will be able to process high sulphur crude,” he said.

With the expansion of Panipat refinery to 15 million tonne and setting up of the 15-mt Paradip refinery, the company’s annual refinery capacity including that of its subsidiaries will increase to 81.4 mt by 2011-12. The naphtha cracker complex along with the PX-PTA units is coming up at the refinery at a cost of Rs 14,439 crore. With the commissioning of the complex, the company’s exports of naphtha will stand reduced to 1 mt.

The company is also engaged in upgradation of fuel quality to Euro IV norms from April 1, 2010 for supply in 13 major cities. The rest of the country will switch to Euro III norms. The total expenditure on product quality upgradation will be over Rs 16,941 crore.