June 21, 2015:

With Oman Oil Company (OOC) reluctant to put more money, Bharat Petroleum Corporation Limited (BPCL) has decided to fund the Rs180-200 billion expansion of the Bina refinery in Madhya Pradesh on its own.    Bharat Petroleum, India's second-biggest state refiner, plans to raise Bina refinery capacity to 15 million tonnes in two phases — to 7.8 million tonnes a year from current six million tonnes at a cost of Rs350 billion by 2018 and then to 15 million tonnes at an additional investment of Rs180-200 billion in 5-6 years.   

Oman Oil Company (OCC), which holds 26 per cent stake in the Bharat Oman Refineries (BORL) — the firm that built the refinery, is willing to participate in the first phase expansion but not in the second phase, a top official said.    "We are close to firming up plan to go ahead with the second phase expansion on our own. BPCL will fund the project," he said. Oman Oil Company in 2009 paid a 50 per cent premium for a re-entry into the Rs11,397-crore Bina refinery project. The project was originally conceived through a joint venture company, BORL but the OCC did not contribute equity beyond the initial Rs750 million  The Omanese oil major came back to pick up 26 per cent stake in the project for an additional Rs12.20 billion.

The BORL was formed as an equal joint venture company way back in 1993. However, following inordinate delays in the implementation of the project, OOC froze its investment in the company at Rs750 million for a two per cent equity stake.    BPCL, which holds 49 per cent stake in the project, provided the unbridged portion of the Rs 40-billionequity in form of loan. The state-run firm got its loan back once OOC made payments for its 26 per cent share.    The remaining 25 per cent is with financial institutions. BPCL also operates a 12 million tonnes a year refinery at Mumbai and 9.5 million tonnes Kochi unit. It also has majority stakes in the 3 million tonnes Numaligarh refinery in Assam.    The official said BPCL is expanding and upgrading its Kochi refinery in Kerala to process high sulphur crudes by 2016. Kochi refinery capacity is being raised to 15.5 million tonnes from current 9.5 million tonnes.    Crude grades with a high sulphur content are cheaper, and refineries that have installed speciality secondary units to process them can lower feed costs and increase their margins. Besides boosting margins with the upgrade and expansion, the refinery will also be able to produce fully Euro IV compatible petrol and diesel.    Also, Numaligarh refinery capacity is being planned to be raised to 9 million tonnes.

The expansion, however, is still at the drawing-board stage and it would hinge on tax concessions and other benefits from the central and state governments, he said.  

By Times of Oman