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Scarce natural resources: Cairn India to not export oil from Barmer Refinerie

Central government on Thursday, May 19, 2016 in New Delhi expressed that due to the scarcity of natural resources, Cairn India, an oil and gas exploration and production company, headquartered in  Gurugram (former: Gurgaon), India shall not make any exports of raw oil extracted from the oil refineries in Barmer district, Rajasthan in the country.

Expert statement:

  • Government is the guardian of natural resources and has the constitutional right to preserve the same. Government cannot be secluded from the right to control the exports of the country.
  • The export of raw oil is not in good health of the country. If the same is not controlled and export of raw oil is made, then it will lead to a raise in the prices of energy and electricity generation in the country as stated by Mr. Tushar Mehta, additional solicitor from the Ministry of Petroleum and Natural Gas.
  • Mehta shared his opinion and stated that Cairn India (subsidiary of the British company Vedanta Group) can make the sale of excess of raw oil generated from the oil refineries to any refinery in the country.

Production Sharing Contract:

Cairn wishes to extend the production sharing agreement for another 10 years as the present agreement is due to expire on May 14, 2020.

Government of India is not extending the production sharing agreement with Cairn after the year 2020. After 2020, the extraction and output of crude oil will be solely governed by the government of the country.

Cairn | Company Losses | Company Opinions

  • Raw oil is sold at a less rate in the country than what it is sold for outside the country. Due to a constraint on exports now, company has to face a reduction of 250-300 crores in terms of the royalty received.
  • Domestic companies are purchasing crude oil at a reduced value of about 20% in comparison to the values of the overseas market.
  • Export of crude oil by Cairn at a higher rate in the overseas market will reward the company with increased royalty fees which ultimately will benefit the government in terms of taxes.
  • Cairn India has suffered losses of about 1400 crores till date due to which the company is highly keen on selling crude oil in the overseas market.

Oil extraction and other costs:

Experts of the petroleum industry revealed that about Rs 32 per barrel is spent on the extraction and output of oil. In the overseas market, the very same oil is sold at a rate of and above 45 dollars.
In some previous times, the rates for oil fell down to about 27 dollars per barrel where the company did suffer losses during that period.

Extraction of oil and its limits:

  • Cairn is generating an output of about 1.70 lakh barrels of crude oil on a daily basis in the state of Rajasthan.
  • The company has a grant of generating about 2.05 lakh barrels of crude oil on an everyday basis even after which the company has made a request to the Central Ministry of Environment, Forest and Climate Change to increase this limit to 3 lakhs for the extraction and output of crude oil.
    The Central Ministry of Environment, Forest and Climate Change is not approving this request for it believes the source of crude oil and on its way to extinguishing at a rapid speed. Cairn has halted and is not on a search for new oil wells in the country.

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