Cals in talks with BP for crude oil supply

Spice Energy-promoted Cals Refineries is in talks with the world's third largest energy company, BP, for a crude supply and product offtake deal.

The company is setting up a 5 million metric tonne per annum (mmtpa) refinery at an investment of $1 billion at Haldia by relocating an existing refinery of Bayernoil, at Ingolstad in Germany.

BP is a joint venture partner in Bayernoil. Austria's OMV, Italy's Eni and Venezuela's PDVSA are the other partners in the company which is selling one of its refinery.

BP usually supplies to the refineries where it has got an equity stake. The sale of the refinery by Bayernoil has also resulted in stoppage of crude supply to that refinery.

"We are interested in crude supply and product offtake deals from India," said Pia Macrae, a spokesperson for BP India. "Cals is one of the companies we are talking to," she said.

However, BP India insisted that the talks with Cals have no link with losing business at any other place. BP was earlier in talks with public sector Hindustan Petroleum Corporation to build a refinery in India at an investment of $3 billion. But the talks failed to make any headway.

Cals Refineries raised $200 million through a global depository receipt on the Luxembourg Stock Exchange in November, attracting investments from Dubai Investment Group, a part of Dubai Holding, and London's RP Capital. It is now hoping to raise a further $100-200 million from an strategic investor.

"We don't plan to buy stake in Cals Refineries," clarified the BP spokesperson.

The refinery would require 2.5 million tonne of heavy crude and a similar supply of light crude. "BP could be one of the suppliers," said Arun Ramachandara, commercial head (refining), Cals Refineries. "It may take a week or a month for the deal to get finalised," he said.

The refinery being relocated is Euro-4 compliant and Cals plans to export petrol and diesel produced here. BP may sign an offtake agreement for these two products from the company. Cals Refineries is also planning to produce, ATF, LPG and Petco for the domestic market.

The existing plant in Germany is expected to be shut down by June, and after its relocation production is expected to start in 2010.