BP, Aramco, Total eye stake in HPCL refinery

Talks on for sale of 50% share in Bathinda refinery.

Hindustan Petroleum Corporation (HPCL) said it would sell to a foreign player 50 per cent stake in Guru Gobind Singh Refinery (GGSRL), which is putting up a greenfield nine-million-tonne per annum refinery near Bathinda in Punjab.

Petroleum Minister Mani Shankar Aiyar indicated that Saudi Aramco was one of the three players with which talks were under way. HPCL sources said the company was also talking to British Petroleum and Total.

"We are in talks with three companies though some more players have shown interest. We hope to finalise the deal in a month," HPCL Chairman MB Lal told reporters here.

HPCL and the Punjab government signed a deed of assurance for the Rs 17,000-crore refinery and petrochemicals complex being set up by GGSRL.

Lal said the foreign partner and HPCL would reduce their stake in GGSRL to 26 per cent each through an initial public offer planned in 2007.

The refinery is expected to cost Rs 12,000 crore. The cost includes an expenditure of Rs 2,500 crore on a pipeline from the crude oil terminal in Mundhra (Gujarat). The pipeline is expected to be completed before March 2007, while the refinery is slated to be commissioned, along with a part of the petrochemical project, before 2009.

The company hopes to put up a naphtha capacity of one million tonnes and will soon decide whether to set up a cracker unit or an aromatic complex.

As per the agreement reached between GGSRL and the Punjab government, the state would provide an interest-free loan of Rs 250 crore annually in lieu of sales tax paid by the company. From the sixth year onwards, GGSRL will have to pay sales tax. The company had earlier sought a sales tax exemption for 10 years, which would have cost the state government over Rs 10,000 crore, Punjab Chief Minister Amarinder Singh said.

"While sales tax benefits would have acted as a shock absorber, we have tried to improve the viability of the project through the petrochemicals project," Lal said.

HPCL's Director, Finance, C Ramullu said the details of financing the project were being worked out. The project was expected to have a debt-equity ratio in the region of 1.5:1 to 2:1, he added.

Company executives said GGSRL was analysing the prospects of a global tender to speed up the award of contracts and reduce construction time.

Lal said HPCL had proposed to set up another refinery with an annual capacity of over 6 million tonnes in Barmer (Rajasthan), using crude produced by Cairn Energy.