HPCL to finalise 10 licensors this week for Rajasthan refinery project

The company, taken over by upstream energy major ONGC this January for a tad over Rs 36,915 crore as part of the government's divestment process, has around 24.8 mt refining capacity now.

Published: 02nd September 2018 02:24 PM  |   Last Updated: 02nd September 2018 02:24 PM   |  A+A-

Image for representational purpose only. (File photo | Reuters)

By PTI

MUMBAI: ONGC-owned state-run oil marketer Hindustan Petroleum (HPCL) will award the licensor agreements this week to 10 of the 12 vendors it needs for the upcoming Rs 43,130-crore project Barmer refinery in Rajasthan.

Prime Minister Narendra Modi had laid the foundation stone for the 9-million tonne or 1.8 lakh bpd greenfield refinery at Pachpadra village in Barmer district of Rajasthan being set up in a 75:25 joint venture with the state administration.

It is slated to be completed by end-2020. The foundation stone for the project was first laid in September 2013 by the then president of ruling Congress Sonia Gandhi.

But the project remained a non-starter as the state, which voted in a BJP government, reworked the project and changed incentive structure including an interest-free loan of 16,845 crore to HPCL to be paid back in 15 years from the commissioning of the project.

The company, taken over by upstream energy major ONGC this January for a tad over Rs 36,915 crore as part of the government's divestment process, has around 24.8 million tonne (mt) refining capacity now.

It has plans to ramp this up to 60 mt by 2030 and brownfield expansion to achieve the target is afoot with work.

Currently, HPCL is expanding the capacity at its flagship Mumbai refinery from 6.5 mt to 9.5 mtpa at a cost of over Rs 5,000 crore, and the Visakhapatnam refinery from 8.3 mt to 15 mt at a cost of around Rs 21,000 crore.

That apart, it also has a 9 mt facility at Bathinda in Punjab in a 49 per cent equal joint venture Mittal Energy of LN Mittal which will be doubled in a few years.

"We are working to award the licensor agreements to 10 of the 12 vendors we need for the Barmer refinery this week. Already a lot of civil work is progressing. Since the foundation stone was laid in January, weve invested close to Rs 6,000 crore in civil work. A water reservoir is almost complete and so are many other basic civil structures," M K Surana, chairman and managing director, said here over the weekend.

He declined to name the licensors citing confidentiality agreements and the sensitivity of the work they will perform for the third largest state-run oil marketer.

At the AGM last Thursday, Surana had announced a Rs 75,000 crore capital expansion for the next five years, most of which will go into capacity ramp up.

For the current fiscal, the company has a capex plan of Rs 8,425 crore, most of which will go into the ongoing brownfield expansion at Vizag and Mumbai.

Giving a break-up of the Rs 75,000 crore capex, Surana said of this, Rs 33,300 crore is earmarked for refinery expansion, Rs 29,550 crore for marketing, around Rs 770 crore for renewables and R&D, and Rs 12,000 crore for joint ventures.

He also said the company is focused on enhancing refinery footprint to increase self-sufficiency (it buys a lot of fuel from other refiners as it sells much more than (36.9 mt last fiscal) what it refines (24.

8 mt), diversify into profitable segments like petrochemicals, expand refining and marketing businesses into new geographies and also enter the high margin natural gas distribution.

HPCL will also have 12.5 per cent consideration in the proposed 60 mt Ratnagiri refinery in Maharashtra if it materialises.

Additionally, Surana said the company is in discussions with the parent ONGC and Mangalore Refinery & Petrochemicals (which is majority owned by ONGC) for a merger.

HPCL owns 17 per cent stake in MRPL while ONGC holds a majority 71.63 per cent.

"Eventually it makes no sense for ONGC to run two separate companies in the same business. A merger can bring greater synergy and economies of scale to us, while we have a little over 15,000 fuel outlets, MRPL has just six of them.

"The way it has been set up makes it difficult for them to open more retail outlets as well," Surana said.

He further said that with MRPL, they can unload crude at Mangalore and get freight advantage.

"We have a large R&D facility in Mangalore set up at a cost of Rs 3,000 crore. We have refinery in Vizag on the East Coast, Mumbai on the West Coast, Bathinda in the North and Mangalore in the South. If we merge we can integrate facilities and create lots of synergies," he added.

But he refused to offer a timeline for the merger, saying "three boards are involved. We are in discussions with ONGC and we are progressing well."

The Barmer refinery at Pachpadra will be able to process local crude from Vedantas Barmer oil field, apart from imported crude oil.

Of the 9 mt capacity, 2 mt will house a petrochemicals complex.

The state has allotted 4,800 acres for the refinery, which was conceived by the Manmohan Singh government in late 2012.

Surana said the Barmer refinery project is on course will be able to commission it as planned2022-22.

When asked about fund raising for the project, finance director J Ramaswamy told PTI that the project will have Rs 28,000 crore of debt on their book, which will be raised from next fiscal.

"We will have financial closure by next fiscal when we will need the money," he said.

India's annual refining capacity today stands at 235 mt. Of this, 194 mt are consumed domestically.

The country is in the process of increasing the refining capacity to around 310 mt by 2023 to become a refinery hub.

The market leader Indian Oil alone will have 140 mt tonne capacity by then when domestic demand for petrol and diesel is expected to go up by two-thirds to 170 billion litres.

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