Special Correspondent

Stake holders disinterested as they feel the project is economically an unviable proposition

The joint venture, if it fructifies, will account for 20 per cent of India’s domestic oil production

JAIPUR: The Rajasthan Government is going to vigorously pursue the demand for setting up a well-head refinery at Barmer where Prime Minister Manmohan Singh this past weekend dedicated to the nation the Mangala oilfields.

Mangala, discovered by Cairn India in 2004, along with oilfields Bhagyam and Aishwariya in RJ-ON-90/1 off Barmer Basin, has recoverable oil estimated at one billion barrels which includes proven plus probable gross reserves and resources of 685 million barrels of oil equivalent. Yet experts are not excited about the potential the area holds for an oil refinery.

“Refinery is the dream of every Rajasthani, especially those who live in western Rajasthan,” observed Chief Minister Ashok Gehlot. Mr. Gehlot, who pleaded before Dr. Singh and Petroleum Minister Murli Deora the case of Barmer at the dedication ceremony, said generations have been dreaming of striking oil in the Thar desert and the place proving to be a new Gulf region for the whole of India.

Rajasthan has been witnessing political battles over the past five years between the Congress leadership and the previous government headed by the Bharatiya Janata Party over setting up of a refinery. Former Chief Minister Vasundhara Raje often held the Congress leadership responsible for its failure to prevail upon the previous United Progressive Alliance Government for establishment of an oil refinery.

The Congress received flak from its rivals as ONGC appeared to back out on the project after its board meeting in April 2005 in principle approving creation of a special purpose vehicle (SPV) in the name of “Rajasthan Refinery Limited”.

MRPL, the Mangalore-based refinery nominated by the Union Government to purchase the entire crude oil production from the block, made a proposal in May 2005 for setting up a 5 MMTPA (million metric tonne per annum) refinery based on Mangala crude. The proposed capacity was subsequently revised to 7.5 MMTPA tonnes in July the same year. In March 2006, the investment was estimated at Rs.10,000 crore. MRPL was to hold 46 per cent equity in the SPV while the Government of Rajasthan promised its equity participation in the form of land.

In December 2005, officials of MRPL/ONGC along with State Government officials visited potential refinery sites — two sites in Barmer, Thaleson Ki Dhani and Leelala and one in Jalore. The Barmer locations were preferred for availability of water from the Indira Gandhi Canal Project. The No Objection Certificate for setting up the refinery was received from Air Headquarters next January.

Even while speaking about the potential of further oil finds in the neighbourhood, both Cairn India and ONGC, its partner holding 30 per cent in the joint venture which will account for 20 per cent of India’s domestic oil production in another two years, sounded disinterested if not sceptical about the prospects of their involvement in setting up a refinery in Barmer.

“There is a lot of oil to be found here but our area is exploration and excavation,” said Cairn India Managing Director Rahul Dhir during an interaction with media persons after the dedication ceremony.

“We share the State’s sentiments on refinery. Yet economics cannot be overlooked,” said ONGC Chairman R. S. Sharma. The Barmer crude has its own characteristics with its high wax content and no single refinery can process the crude from the area, he testified.

“ONGC has spent considerable time and money in assessing the viability of the project,” he pointed out. “The situation now is, for making the refinery a viable proposition the State Government has to provide it wide-ranging support. In fact, all the refineries function on concessions given by governments,” he pleaded.

The State is apprehensive of this condition of “support” as the previous time the concessions sought by ONGC included those on cash outgo of existing revenues, VAT and Cess to the tune of Rs.2,900 crores annually besides exemptions in electricity duty, entry tax and CST amounting to a total of Rs.689 crore for the entire period of the refinery. As per State Government calculations then the concession sought reached a whopping Rs.26,216 crore in the end while similar concessions were not extracted in the case of setting up refineries in Bina (Madhya Pradesh), Bhatinda (Punjab) and Paradeep.