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Saturday, Mar 25, 2006
Industry & Economy - Petroleum
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HPCL to go ahead with Bhatinda project alone
The company implementing the Bhatinda project, Guru Govind Singh Refineries Ltd, plans IPO.
BP pulls out as it does not consider attractive to invest in refining and marketing in India.
BP still interested in investing in oil and gas exploration.
New Delhi , March 24
Hindustan Petroleum Corporation Ltd (HPCL) on Friday said that it would implement the Bhatinda refinery project on its own. Speaking to presspersons after the British oil giant, BP Plc, announced the decision to pull out of the joint venture, Mr M.B. Lal, said that HPCL will implement the project as planned.
Stating that HPCL would go ahead with the implementation of the project despite the set back, Mr Lal said the company was in touch with other multinationals including Total of France, and foreign partners could join the project at a latter date. The company may subsequently go for an initial public offering (IPO) closer to the completion of the project in 2010.
After the equity portion of about Rs 5,000 crore was tied-up, Guru Govind Singh Refineries Ltd (GGSRL), the company implementing the project, would consider an IPO.
The nine-million-tonnes refinery at Bhatinda in Punjab is proposed at an investment of about Rs 13,000 crore.
Mr Lal said, "BP has communicated to us that their board did not consider it attractive to invest in refining and marketing in India."
Stating that no written communication has been received from BP, Mr Lal said that in its verbal communication to HPCL on March 22, BP said that at its board meeting in London, while reviewing global opportunities for investment, had concluded that "shareholders returns were better elsewhere."
"BP, however, remains interested in investing in oil and gas exploration and was looking at bidding for blocks offered under NELP-VI," he said.
BP has also told HPCL that it was not looking at any other refining and marketing opportunity in India or in its immediate neighbourhood.
The Bhatinda refinery project was conceived as a joint venture project and HPCL would continue to look for partners. In October 2005, HPCL and BP had signed a letter of intent (LoI) to form a 50:50 venture to construct, operate and control the Bhatinda refinery to start with, and later cover the entire refining and marketing sectors.
Mr Lal, however, maintained that there was no stand-off between the two companies on any issues and the relationship between the two commercial entities remained amicable even today.
Further, the LoI provided for a broader strategic partnership for participation in greenfield refinery and/or a terminal project on the eastern cost of the country; providing opportunities to HPCL to acquire refining and marketing assets that BP may identify from its overseas portfolio. Asked whether other arrangements with BP stand, Mr Lal stated that the arrangement with BP ends on all fronts.
When asked whether there was excess refining capacity developing in the country, Mr Lal responded in negative. He stated that HPCL's existing two refineries on east and west coast Mumbai and Visakhapatnam could look at the export market. The company plans to invest over Rs 13,000 crore to raise the capacity of its Visakhapatnam refinery (Rs 8,000 crore) and setting up an aromatic plant in Visakhapatnam (Rs 5,500 crore).
HPCL also plans to set up a $1 billion corpus for acquisition of oil assets overseas.
"Visakhapatnam refinery capacity is currently being raised to 8.3 million tonnes from 7.5 mt. It will further be raised to 15 mt in the next three years at an investment of about Rs 8,000 crore," he said.
The capacity of Mumbai refinery is being raised to 7.9 mt from 5.5 mt. The upgrading of the Visakhapatnam refinery was to produce 83-84 per cent distillates petrol and diesel and ultra low sulphur fuel through processing of high sulphur crude, he said.
Typically, auto fuels make up for 70 per cent of the output.
The company also plans to invest over Rs 5,500 crore in an aromatic unit at Visakhapatnam, based on the naphtha produced at the refinery.
Speaking to presspersons, Mr M.N. Prasad, CEO of Prize Petroleum Co Ltd, HPCL's subsidiary for upstream oil and gas exploration business, said the company was scouting with a $1billion corpus for discovered fields in three to four countries. HPCL is to hold 50 per cent stake in Prize Petroleum and for the remaining, 14 major financial institutes have shown interest.
"We wanted to garner $60 million by offering 50 per cent stake in Prize but we have offers for $300 million-400 million," he said.
"Once equity is tied-up, then we would go for acquiring a discovered oil field and use the cash flows to build on the exploration portfolio," he said. The funding issue will be sorted out in two months, he added.
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