Oman Oil may pull out of Bina project

Close on the heels of British Petroleum's withdrawal from the Bhatinda refinery project, Oman Oil is likely to pull out of the Rs 9,000 crore (Rs 90 billion) Bharat Oman Refinery at Bina, Madhya Pradesh. BORL is a joint venture of Bharat Petroleum Corporation and Oman Oil.

Sources close to the development said the delay in implementation of the project would force Oman Oil to pull out of the project completely. Land for the project was acquired way back in 1993.

R P Singh, managing director, BORL, told Business Standard, "The Oman government, promoter of Oman Oil, is expected to take its decision on the project next month."

He said in case of withdrawal of Oman Oil from the project, the company plans to mobilise funds from new partners, domestic as well as foreign, and may go for initial public issue of over Rs 1,000 crore (Rs 10 billion). Recently, BORL received an offer of Rs 6,000 crore (Rs 60 billion) from a consortium of 14 banks, but nothing has been decided.

Oman Oil and BPCL have injected funds in this project. Oman Oil has put in Rs 76 crore (Rs 760 million) so far out of a total expenditure of Rs 190 crore (Rs 1.9 billion).

If it does not invest any more, its stake will stand at 3 per cent on completion of the project. But the agreement gives it a leeway to scale up stake up to 26 per cent by chipping in additional funds.

According to market sources, the delay in implementing the project forced Oman Oil to go for an alternative investment avenue. For example, it has formed Oman-India Fertiliser Company by picking up 50 per cent stake. The remaining 50 per cent is with Iffco and Krishak Bharati Cooperative.

Recently, British Petroleum quit the Bhatinda refinery project of Hindustan Petroleum Corporation. The BORL project consists of a 6 million tonne per annum refinery complex at Bina, a single point mooring system and crude oil terminal at Vadinar in Jamnagar in Gujarat.

It will also have 935 km cross-country crude oil pipeline from Vadinar to Bina. The project is likely to be commissioned by December 2009.

The BPCL board had approved investment in BORL equity amounting to Rs 1,996 crore (Rs 19.96 billion), representing 50 per cent of the total equity being raised by BORL.

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