Cairn India, the operator of country’s largest onshore oil field, announced on Tuesday that

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it has commissioned a 590 km heated and insulated crude oil pipeline from Barmer to Salaya. The pipeline that cost the company close to Rs 100 crore will cut transportation cost from $8 per barrel, through road tankers, to $1.5 per barrel now through the pipeline.

Oil supplies have commenced to the private refineries from the delivery point at Salaya, Cairn said in a media statement on Tuesday. Essar group that runs a refinery at Vadinar in Gujarat has received its first batch of domestic Mangala crude oil through the pipeline. The pipeline will shortly facilitate crude supplies to Reliance Industries Limited’s (RIL) refinery in Jamnagar. Currently, RIL is getting crude through road tankers.

“Sale of crude to Indian Oil Corporation (IOC) through the pipeline is also expected to commence soon. Production is currently 60,000 barrels of oil per day (bopd),” Cairn said. Crude supplies to IOC have not started so far. However, trucking would still be required for the sales to Mangalore Refinery & Petrochemicals Ltd (MRPL) as the Salaya-Bhogat section of the pipeline is yet to be commissioned. MRPL gets nearly 8,000 bopd. The Salaya to Bhogat section of the pipeline, on the Gujarat coast, is expected to be completed in 2011.

The commissioning of the pipeline will help Cairn gradually to increase both production and sales. Pipeline sales are expected to reach 125,000 bopd in the second half of calendar year 2010 and sales arrangements with four buyers are now being put in place for 143,000 bopd.

Naresh Nayyar, chief executive officer of Essar Energy said, “The crude oil supply from Mangala will ramp up over the next few weeks and is expected to account for around 10 per cent of the total refinery intake.”

“Being heavy crude, Mangala will meet part of our increasing requirements for heavy and tough crude oils which should contribute positively to the refinery economics,” Nayyar said in a statement to press on Tuesday.

Cairn’s stock at the Bombay Stock Exchange closed at Rs 305.05 on Tuesday, up 0.10 per cent from the previous trading session. The stock has climbed 28 per cent in the past 12 months.