Indian govt shoots down Cairn India’s crude oil export proposal

Indian govt shoots down Cairn India’s crude oil export proposal

New Delhi: India’s Petroleum ministry has shot down a proposal from Cairn India to export crude oil from its Barmer block in Rajasthan, saying its production sharing contract (PSC) with the central government does not provide for sales abroad.

The ministry’s decision comes despite the fact that exports could fetch the company $12 per barrel more than through domestic sales, which, incidentally, are at a discount to market prices due to a 2009 government directive. Cairn is forced to sell Barmer crude at a 10-15% discount to Brent.

Cairn has pitched for permission to export crude from Barmer, arguing that such exports could lead to substantial additional revenue for the state and central governments in terms of royalty, taxes and profit on petroleum. The company has received offers from various global refineries to buy the crude at around $12 per barrel more than what it gets from domestic sales at the moment.

According to Cairn India, the export proposal (assuming that the entire production is exported) would fetch the government INR28bn ($440m) extra per year at 200,000 barrels per day (bpd), or INR52.89bn at 300,000 bpd.

Sources indicate that the ministry, after examining Cairn’s proposal, rejected it even though the company had mooted a swap mechanism, that it could source cheaper crude from overseas for public sector refineries in exchange for the permit to export Barmer crude.

Petroleum and oil minister Dharmendra Pradhan said that crude oil exports could not be permitted since the country was forced to import 77% of its annual crude oil requirements.

Shirish Nadkarni

Shirish Nadkarni is a management consultant and freelance international journalist, who has been writing on all spheres of Indian business for the past three decades for a number of reputed overseas publications. An avid sportsman, Nadkarni has represented India in international veterans' badminton since 1997, and was the 55+ age group doubles world champion in 2005.

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