The Oil Ministry has asked the Law Ministry to examine whether Cairn India and flagship explorer ONGC, its 30% partner in the Barmer fields, should be allowed to recover from oil sales nearly $700 million they propose to spend on a pipeline for carrying crude from the combine's Rajasthan fields, sources said.
The 585-km pipeline from Barmer to Salaya near the Gujarat coast is estimated to take at least 18 months and the Oil Ministry's move could derail the combine's plans to start pumping oil from Barmer in the first quarter of 2009.
Oil Ministry officials, however, say a reference to the Law Ministry is required on two counts. First, it can open precedence for other companies such as Reliance Industries to lay similar claims with regard to their oil/gas evacuation infrastructure.
Second, the government will own the pipeline once the companies recover their cost. The catch is that the government will have no use for it after 8-10 years, which is the Barmer field's life.
The pipeline has been designed especially for the waxy crude from Rajasthan and will have in-built heating mechanism. This fact gets accentuated when one considers that Hindustan Petroleum is also laying a crude-carrying pipeline - which almost runs parallel to the Cairn pipeline - to feed its proposed Bhatinda refinery barely 30 km from the Barmer fields.
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