The Telegraph
Since 1st March, 1999
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ONGC crude for private refiners in pipeline

Calcutta, Sept. 30: Oil & Natural Gas Corporation (ONGC) is gearing up to sell crude and other related products directly to domestic refiners in the private sector. Until now, the public sector crude producer has been allowed to sell its products only to PSU refiners.

Confirming the move, ONGC chairman Subir Raha said the government has in principle agreed to its request for an approval whereby it can sell its products at competitive prices to the private sector.

“The government has already accepted our request in this regard although we are yet to receive the letter. Once the letter comes, we will start negotiating with the players in the private sector to sell our products,” he said.

Industry insiders said the move is aimed at selling its products directly to the Reliance, which is currently the only player in the private sector with a refinery in operation. The other major player in the league is Essar Oil, which is expected to commission its refinery at Jamnagar in Gujarat, in 2003-04.

ONGC has already locked horns with the PSU refiners on the issue of disputed pricing structure.

While the international price of crude has zoomed up to over $ 30 per barrel, the interim price for ONGC crude has been fixed at $ 22.

“We are working on a formula with PSU oil companies for a new price structure, which should be based on market variables. Until or unless the formula is accepted by all of us, we are to get the interim prices,” Raha said.

The direct marketing arrangement with players in the private sector, however, is expected to be based on the import parity price of crude, which will certainly provide a breather to ONGC.

Raha, however, did not say whether the PSU oil companies would bear a share of the losses borne by ONGC because of the current pricing arrangement.

Meanwhile, ONGC has decided to cut down its production of naphtha and LPG in view of the depressed demand. The company has lost about 15,000 tonnes of LPG as state-run Indian Oil, Bharat Petroleum and Hindustan Petroleum have not lifted committed quantities. It also urged the government to allow it to sell these products as well to other companies.

Further, ONGC has plans to export part of its crude and other petroleum products and sought the government’s permission in this regard.

“Crude is not on the government’s export list. We have approached the government for approval but nothing has come in as yet,” he said.

If the government approves crude export, ONGC can import some low-graded crude and after processing, can export the same with good margins, he said.

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