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Indian oil corporation dumps Nigeria oil

Nigeria News

 Business Line reports that Indian Oil Corporation Ltd will buy oil from Cairn India’s Rajasthan field at a discounted price to Nigerian Bonny Light crude.

For the first fortnight of this month, the Bonny Light average was approximately $64/bbl. At the current price, therefore, the discount works out to about 12-13 per cent. The average price for 2008 was $100.9/bbl. Cairn crude has been benchmarked to Nigerian Bonny Light.

Asked how the discount has been worked out, official sources said that it would be the difference in Gross Product Worth (GPW) between the premium Bonny Light and crude from Mangala field in Rajasthan coupled with a 2.14 per cent concession for higher pour point and viscosity of Cairn crude.

GPW is the fuel a particular grade of crude can produce.

IOC has told the Petroleum Ministry that it can lift the crude only from January or February 2010. It is in the process of upgrading its infrastructure to take the crude.

The initial buyers of the Cairn crude will therefore be the other two Government nominees, Mangalore Refinery and Petrochemicals Ltd (MRPL) and Hindustan Petroleum Corporation Ltd (HPCL), with whom Cairn is still negotiating the price.

Sources said though IOC and Cairn have firmed up the price, an agreement would be signed only after the IOC board gives its approval.

“It has been communicated to Cairn that the crude price with IOC can undergo a change if the other offtakers are given at a lower price,” sources added.

The Government has nominated the three public sector refiners to lift three million tonnes of the Rajasthan crude from the initial output. During the initial two years of production (2009, 2010), HPCL will take 0.3 million tonnes (mt), while MRPL and IOC will take 0.2 mt each. In the subsequent years – 2011, 2012, HPCL will lift 0.5 mt, MRPL 0.4 mt and IOC 1.5 mt.

Cairn is set to commence production of crude oil from the Mangala field soon. The expected initial volume will be about 5,000-10,000 barrels of oil/day (bopd). Cairn has been maintaining that pricing agreement with refiners will not be a deterrent for starting production.