MUMBAI (Commodity Online): India’s largest crude oil refiner, Reliance Industries Ltd (BOM: 500325) would now become the first private sector refiner in the country to process domestic crude. The company has signed a deal with Cairn India Ltd (BOM: 532792) to buy oil from company’s Mangala oilfields in Rajasthan.
Cairn India stocks traded positive on the Bombay Stock Exchange (BSE) today at Rs.266.90 up by close to 1%, while RIL traded in red due to overall weakness in the markets.
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RIL stocks sank on the BSE at Rs.1875 down by 2.3% owing to the weak market sentiments. The benchmark index, Sensex opened in red and continued downward trend at 15686 points down by 225 points or 1.5% in the morning trading hours.
The deal comes within a week of the UK explorer's Indian arm getting government nod to sell crude to private refiners.
Though Cairn did not disclose the volumes agreed upon, sources said the company will sell seven parcels of 200,000 barrels each, totalling 1.4 million barrels, this year. Crude will be transported in heated trucks and the first parcel will reach Reliance's Jamnagar refining complex by the third week of November.
Relinace will pay the same price as agreed between Cairn and government-nominated buyers such as ONGC subsidiary MRPL, IndianOil and Hindustan Petroleum.
Cairn India will supply crude oil from Mangala field to Reliance Industries (RIL) in Jamnagar, Gujarat. The crude oil will be delivered to RIL's Jamnagar refinery through heated crude oil tankers.
The implied price realization on sale of crude to RIL represents an average 10-15% discount to Brent on the basis of prices prevailing for the six months to September 2009, Cairn said
This agreement is pursuant to the Government of India (GoI)'s approval allowing private refiners to qualify as additional off-takers of the Rajasthan crude, Cairn India said in a statement.
Cairn India has requested the Government to nominate additional off-take arrangements and the discussions with other private refiners are in progress, it said.
Cairn India had on 29 August 2009 started crude oil production from Mangala oilfield in Rajasthan and is producing 12,000 barrels a day. The company had delivered first cargo of 2,09,000 barrels of crude oil to the state-run MRPL on 8 October 2009.
