Prime Minister Manmohan Singh, petroleum minister Murli Deora (extreme left) and his deputy Jitin Prasada (second from right), Rajasthan chief minister Ashok Gehlot (second from left) and Cairn India chairman Bill Gammell (extreme right) in Barmer on Saturday. Picture by Rajesh Kumar

Barmer (Rajasthan), Aug. 29: Oil and Natural Gas Corporation Ltd (ONGC) is looking at the possibility of setting up a refinery in Rajasthan.

Ashok Gehlot, the chief minister of Rajasthan, also raised the demand for a refinery while speaking on the occasion of Cairn India’s debut production from the Mangala oilfield here today.

Prime Minister Manmohan Singh, who flagged off the production, said, “Cairn’s efforts show that the investment climate is very good in India.”

“I invite investors from all over the world. The investment climate is positive. We are committed to facilitating (such investment) and providing all assistance,” Singh said.

Speaking to reporters later, ONGC chairman and managing director R.S. Sharma said the company would set up a refinery either through a special purpose vehicle or a joint venture.

Sharma, however, added that the refinery would be set up only if it was found viable. Though the company has held discussions with the state government, it requires adequate fiscal incentives for the project, the ONGC chief said.

Senior officials of Cairn India also indicated that the company would prefer to focus on its core activity of exploration and production. ONGC has a 30 per cent interest in Mangala.

The Rajasthan block will initially produce 30,000 barrels per day (bpd). The production will be ramped up to 125,000 bpd in the first half of 2010. Along with the Bhagyam and Aishwarya oilfields, Cairn’s total output will be 175,000 bpd in 2011.

At their peak production, the Rajasthan fields will account for more than 20 per cent of India’s crude output.

Mangalore Refinery and Petrochemicals Ltd, Indian Oil Corporation and Hindustan Petroleum Corporation Ltd have been nominated by the government to buy the initial output from Mangala in 2009-10 and 2010-11.

Petroleum minister Murli Deora said production from Mangala would save around 7 per cent in the crude import bill. “Cairn has invested about Rs 10,000 crore in the area. The total investment in the project will be more than Rs 20,000 crore,” Deora said.

Cairn India chairman Bill Gammell said the development of the oilfield within five years of its discovery reflected the investor-friendly environment in the country. “(When, in 2004) we had made the Mangala discovery, we knew that it had enormous potential, but I do not think at that time we contemplated the size and scale of the world-class development that lies before us today,” Gammell said.

V.K. Sibal, the director-general of hydrocarbons, allayed fears that Cairn would not be able to market the entire crude with increased production. According to Sibal, there are provisions in the production-sharing contract which give Cairn the right to sell crude to private refiners. “When the production is ramped up, the government will see that the evacuation is complete. The company and the government will be working together on this,” Sibal said.

On ONGC paying Cairn’s share of royalty in the field to the state government, Sharma said the Centre had assured that the company would be reimbursed. “We discussed the issue with the ministry of finance yesterday,” Sharma added.