Cairn India has finally reached an agreement with Oil & Natural Gas Corporation on building a $340 million pipeline to transport crude oil found in Barmer district of Rajasthan to Gujarat.

The two partners favoured inclusion of the pipeline cost in the field development plan for the Rajasthan fields, that will be recovered from sale of crude oil. Like the cost for developing Mangala, Bhagyam and Aishwariya fields, the pipeline investment will also be shared between Cairn and ONGC in 70:30 ratio.

Cairn-ONGC will first build a 340 km line to Indian Oil Corporation's Viramgam pipeline terminal in Gujarat. Viramgam is connected by pipelines to IOC's Koyali, Panipat and Mathura refineries, which will be the potential customers of Rajasthan crude. Smaller pipeline can be built to the coast, or Jamnagar where Reliance Industries and Essar Oil have refineries.

Construction work on the pipeline is scheduled for completion within 12-18 months.

ONGC plans to get its subsidiary MRPL de-nominated as the official offtake of crude oil found by Cairn Energy in Rajasthan and instead sell it to refiners. The ministry has agreed to include pipeline cost in FDP and shift the delivery point of crude oil from field storage facilities to a location at or near the coast. The operator gets to recover cost incurred on field development through sale of oil before government gets its statutory dues.

Also See:

ONGC, Cairn reach pact on crude pipeline (15-Jan-07)

Related Links:
Project profile