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BP, Total eye HPCL refinery pie

August 12, 2005 14:48 IST

Global oil major British Petroleum and French oil giant Total are eyeing equity in Hindustan Petroleum Corp's Rs 8,336 crore (Rs 83.36 billion) Bhatinda refinery in Punjab, a project the state-run refinery hopes to complete in 36 months from the date of financial closure.

BP and Total are keen to enter India's oil retailing market and see Bhatinda refinery as an ideal opportunity to meet the minimum investment criteria that would give them the retail licence, a top company official said on the sidelines of a function organised in Bhatinda to relaunch the project.

A licence to sell petrol and diesel in India is contingent on a company investing a minimum of Rs 2,000 crore (Rs 20 billion) in oil infrastructure projects like refineries, pipelines, exploration and production, and terminals.

"BP and Total have both (independently) expressed interest in the refinery," the official said, adding that discussions on the possible partnership for the 9 million tonne per annum capacity refinery were at a fairly advanced stage and the company would be able to decide on a partner by this year end.

HPCL, which owns a 6 million tonne refinery at Mumbai and a 7.5 million tonne refinery at Vizag in Andhra Pradesh, besides about 6,800 petrol stations throughout the country, is building the Bhatinda refinery through a subsidiary company Guru Gobind Singh Refineries Ltd.

"We need a strategic partner with strong financials. The partner(s) would be given equity in the GBSR, with HPCL retaining majority stake and management control. Entry of the strategic partner would help us achieve financial closure (tying up funding) for the project," the official said.

Petroleum Minister Mani Shankar Aiyar, who was in Bhatinda to relaunch of the project, said multinational firms are being roped in to assist HPCL in the project with a view to complete the refinery before 2009. He, however, refused to give details.

After more than two years of delay, the Punjab government on Friday signed a Deed of Assurance for providing fiscal incentives for the project. The DOA, signed in the presence of Aiyar and Punjab Chief Minister Amarinder Singh, sets the stage for relaunch of the project.

Punjab has agreed to provide interest free loan of Rs 250 crore (Rs 2.5 billion) per year for five years in lieu of sales tax deferment. This amount will be repaid in five years starting from sixth year of commercial production. HPCL was seeking sales tax deferment for 15 years.

HPCL has so far completed site grading and construction of internal roads along with area lighting and construction/drinking water system. Foundation for product tankages have been completed and brick pitching job inside the refinery site is in progress.

HPCL chairman and managing director M B Lal said the company also plans to set up a petrochemical project in Bhatinda. The investment in the petrochemicals hub would be in the range of Rs 5,000-6,000 crore (Rs 50-60 billion), he said.

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