Cairn extends coastal reach via pipeline

Cairn India, the oil exploration and production arm of Vedanta Resources, plans to take its market presence beyond Gujarat and Maharashtra through extension of its existing pipeline.

Cairn owns a 590 kilometre (km) pipeline, called the Mangala development pipeline, which was built to carry crude from Cairn India’s central processing terminal, located near its Mangala field, to Salaya, again in Gujarat.

The extended part of the pipeline is ready and operational, and going by sources, the company is targeting all coastal refineries of India to sell its crude.

Initially, the company had planned a 670 km pipeline from CPT to Bhogat, near Jamnagar, on the Gujarat coast.

However, due to local problems, the last 80 km stretch of the pipeline was not completed and it was confined to Salaya, thereby restricting its ability to supply crude to coastal refineries beyond Gujarat and Maharashtra.

However, sources said the problems have been sorted out and the company now plans to commission the last part of the pipeline so that the crude can be directly transferred to the Gujarat coast for shipping to refineries farther off.

According to the company’s annual report, published recently, the balance section between Salaya and Bhogat (around 80 km) is expected to be mechanically completed in the first half of this fiscal.

“The company is talking to Mangalore Refineries and HPCL’s Vizakh refinery to supply crude, and may approach other coastal refineries too,” said a company source.

India’s crude processing or refining capacity stands at 215 million metric tonne per annum (mmtpa) currently, spread between Indian Oil, Bharat Petroleum, Hindustan Petroleum, Reliance Industries and Essar Oil.

Of these, almost 75% of the refineries are located in the coastal region, making them prospective customers of Cairn India.

What’s more, all the three public sector companies plan to increase their capacity through brownfield expansion and add around 50 mmtpa, while another 50 mmtpa is expected to be added through greenfield refineries, many of which are coastal.

Experts said the extension of the pipeline will give Cairn India greater market flexibility and negotiating power.

Cairn India’s current crude pipeline is the longest continuously heated pipeline in the world as the viscous nature of the crude doesn’t allow transportation through a normal pipeline.

According to the annual report for 2012-13, the company is also setting up a terminal at Bhogat. It is a 160 hectare site located 8 km from the Arabian Sea coast, which will facilitate storage and evacuation of crude by sea and help the company to even target export markets.