New Delhi, Sept. 4: A big fight has broken out between the national oil companies for the high-quality Bombay High crude. Downstream companies Indian Oil, Bharat Petroleum and Hindustan Petroleum want a much larger share of this sweet crude than ONGC is willing to concede.
The problem has arisen as ONGC has itself ventured into the downstream refining business with the acquisition of Mangalore Refinery and Petrochemicals Ltd (MRPL).
MRPL has a capacity to process 9 million tonnes of crude. Since the refinery is located on the western coast it is both cost-effective and convenient for ONGC to supply Bombay High crude to MRPL.
ONGC produces around 16 million tonnes of sweet crude from Bombay High and its other western offshore fields. This constitutes about two-thirds of its total output. Until now, this crude was being shared amongst all the national oil companies.
However, with the opening up of the petroleum sector, the two-year agreement on the existing allocation of crude is slated to come to an end. This has sparked a scramble for the crude with each company trying to protect its own turf.
Sources say the matter has been placed before the petroleum ministry for a final decision.
ONGC western offshore crude has been adjudged to be of the same quality as the Nigerian bonny light crude. This is much better than the Dubai crude which contains a large quantity of sulphur. However, since the Dubai crude is cheaper, Indian oil companies use a mixture of the two crudes in a roughly 55:45 ratio.
Using ONGC sweet crude reduces the cost of the refineries because a high freight charge has to be incurred for importing Nigerian crude. The ONGC fields are also a more reliable source since Nigerian crude oil production sometimes gets hit due to the ongoing tribal strife. This tends to disrupt the refining schedules and also raises inventory costs.
Since ONGC now views itself as a vertically integrated oil company, it would like to first take care of its own refining needs. The other oil companies view the ONGC crude as a national asset in which they should get a due share.
Indian Oil Corporation has taken the stand that it needs the Bombay High crude for its Mathura refinery which falls in the Taj Mahal low-pollution trapezium. The refinery is not allowed to process high-sulphur crude as this leads to higher pollution that would result in damage to the Taj Mahal.