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PM asks OilMin, ONGC to re-examine Barmer refinery proposal

Last Updated: Saturday, August 29, 2009 - 16:05

Barmer: Prime Minister Manmohan Singh has
asked Petroleum Ministry and ONGC to re-examine possibility of
setting up a refinery at Barmer district in Rajasthan to
process the crude discovered by Cairn India in the state.

Rajasthan Chief Minister Ashok Gehlot, who had last
raised the demand for setting up a refinery in the Thar desert
in the presence of UPA chairperson Sonia Gandhi in February,
on Saturday again raised the demand when PM came here to inaugurate the oil find from the Cairn field.

"The Prime Minister has instructed the case to be
re-examined, so we will give it a serious thought and will
come back to you," Petroleum Minister Murli Deora said at the

Gehlot said that it was the aspiration of the people of
Rajasthan that a refinery is set up here and the pipeline
built to transport Cairn India crude to Gujarat coast used for
additional importing oil to be processed at the unit.

ONGC chairman RS Sharma, however, said the viability of
the refinery depends on fiscal incentives like exemption from
sales tax, free land water and power and other sops from the
state government.

ONGC had examine the viability of 7.5 million tonnes a
year refinery but found the rate of return on capital at just
1.5 percent without the fiscal incentives.

"The refinery will be done by non PSU entity possibly a
special purpose vehicle unless the project is economically
viable, he will not get any debt or equipment supplier,"
Sharma said, adding that ONGC was looking at the 12 percent
rate of return on the refinery investment.

ONGC had few years back, made a proposal to set up a well
head refinery at the site of 1,75,000 barrels per day oil
fields in the Barmer district and had sought the allocation of
the entire crude for the project.

But with the exit of Subir Raha who had conceptualise the
project, ONGC had the second thought and commissioned the
re-feasibility and market studies for the project that found
the refinery unviable without state government sops.

ONGC will not set up the project unless it was
economically viable. "The ball is in the court of the state
government," he said, adding the company was having discussion
with the state government on the issue.

While Sharma stated that ONGC and Cairn India had jointly
brought allocation of crude for the refinery project, Cairn
India CEO Rahul Dhir said the company could add more value
through exploration and production rather than a downstream
refinery project.

Bureau Report

First Published: Saturday, August 29, 2009 - 16:05

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