OIL set to pick up 25% in HPCL’s Bathinda refinery
After failed talks with global oil biggies BP, Saudi Aramco and Exxon, HPCL is set to rope in domestic exploration firm Oil India Ltd as its new joint venture partner for the proposed Rs 17,934.61-crore Bathinda refinery-cum- pipeline project.
HPCL has offered 25% stake to OIL in the 9-million-tonne-per-annum refinery, hanging fire for the last eight years. A 25% stake will mean an equity investment of Rs 1,500 crore by OIL in the project to be funded through a debt-equity mix of 2:1.
The OIL board, which discussed the HPCL offer on September 5, has found the opportunity “attractive”. The refinery is estimated to cost Rs 14,144 crore. HPCL has planned a 1,011-km crude oil pipeline from the Mundra port in Gujarat to the inland refinery location at Bathinda in Punjab that is expected to cost Rs 3,790 crore.
OIL has constituted a committee of experts to carry out technical, market and financial due diligence of the proposal. The committee’s report would be considered by OIL in its next board meeting.
OIL’s proposed move to foray into the refining business comes at a time when the government has not taken kindly to state-owned exploration major ONGC’s overtures to diversify in areas other than its core business of oil and gas exploration.
Oiling it out
• The project cost is pegged at Rs 17,935 crore, to be funded through a 2:1 debt-equity mix
• OIL’s 25% stake in the refinery-cum-pipeline project will mean Rs 1,500 crore investment
• OIL board finds HPCL offer attractive. Sets up expert committee to study the HPCL offer
The commissioning of the Bathinda refinery has been held up because of Punjab’s reluctance to offer a good fiscal package for the project. But with the Congress-led UPA at the Centre, the Punjab government under Amarinder Singh signed a deed of assurance with HPCL.
The project was later delayed because an appropriate joint partner could not be finalised. BP’s recent exit was a major setback for HPCL, which then decided to go solo.
OIL has asked the expert committee to also find out the reasons for the delay and why foreign companies like BP, Saudi Aramco and Exxon were staying away from the project.
Petroleum minister Murli Deora has recently written to Congress president Sonia Gandhi to lay the foundation stone for HPCL’s receiving terminal of the crude oil pipeline in Bathinda. It is likely that OIL’s participation in the project will be announced during the event.
Unlike other state-owned refineries, the Bathinda refinery has been configured to process both heavy and sour crude. Like Reliance Industries’ Jamnagar refinery, this,too, will have the flexibility to cater for variations in crude availability and product demand in the short-term.
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