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• The project has been held up by disagreements over compensation for land acquisitionsCairn India Ltd has been unsuccessful in starting work on its 80km pipeline from Salaya to Bhogat in Gujarat, even as Larsen and Turbo Ltd (L&T), which was awarded the work of laying down the pipeline, has declared its intent to exit the project, amid opposition from some groups.Cairn India, which contributes to 20% of India’s domestic crude production, has invested over $3 billion in oil exploration in the Mangala field in Rajasthan, the country’s largest onshore block from where almost 90% of the company’s current crude production comes.
• It aims to take oil production ultimately to 240,000 barrels per day (bpd) for which it needs to complete the Salaya-Bhogat stretch in Jamnagar district, said a company official familiar with developments.The project has been stuck for the last 15 months with local politicians and farmers not allowing the company to acquire land in the area over compensation disagreements.A Cairn India spokesperson declined to comment on the issue. When contacted, an L&T spokesperson said the company does not comment on communications with clients to a third party.
• The Anil Agarwal-controlled Vedanta Group currently holds 59% of the issued share capital of Cairn India. Cairn India and Oil and Natural Gas Corp. Ltd (ONGC) have built the world’s longest continuously heated pipeline for transport of crude from Barmer in Rajasthan to Salaya in Gujarat. Cairn India and ONGC jointly hold rights for developing three hydrocarbon blocks in Rajasthan, with Cairn India holding a 70% stake and ONGC having 30%. The 670km pipeline project, costing at least $900 million, is being developed under the same joint venture.Cairn India currently supplies most of its crude to refineries of Reliance Industries Ltd and Essar Oil Ltd located in Jamnagar and two refineries of Indian Oil Corp. Ltd located in Koyali near Vadodara and Panipat. With the completion of the Salaya-Bhogat pipeline, the company will be able to supply crude to refineries in the south, starting with Mangalore Refinery and Petrochemicals Ltd, with which it has already entered into an agreement.
• Sundeep Bhandari, chairman of Cairn India’s corporate advisory board, wrote to a senior Gujarat government official on 24 January, expressing concern over the need to complete the Salaya-Bhogat stretch to raise production from 125,000 bpd to 165,000 bpd. The letter added that L&T wanted to exit the project. Bhandari expressed the company’ willingness to improve the compensation offer, according to the letter that Mint has reviewed.Sales arrangements are in place for 170,000 bpd with public sector units and private refiners for the current fiscal year, the company recently said in its quarterly results announcement on 24 January.Also, the company’s single-point mooring (SPM) system, involving an estimated investment of Rs. 500 crore, is near completion at Bhogat sea, but it cannot be commissioned as the pipeline work is yet to be completed, said a government official close to the development. SPM is a loading buoy anchored offshore that serves as a mooring point and interconnect for tankers loading or offloading liquid or gas products.
• According to another letter written in September 2011 to the Gujarat government by D.N. Narsimha Raju, joint secretary, ministry of petroleum and natural gas, “Early completion of the project (Salaya-Bhogat) is important to allow increase in crude oil production in the national interest and further delays will result in the pipeline project completion slipping beyond 2012...” Mint has reviewed a copy of this letter.The affected area is dominated by Ahirs followed by the Gadhavi community. “The area is rich with minerals like bauxite and we cannot give away our land at throwaway prices,” said a person in the area through whose field the pipeline is projected to pass. He did not want to be named over concerns that he may be targeted.

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