Oman Oil Set Terms For Buying 26% In Nagarjuna Oil

The Oman Oil Corporation (OOC) has attached a string of riders for picking up a 26 per cent stake in Nagarjuna Oil Corporation's proposed six-million tonne refinery at Cuddalore.

Some of the conditions include identifying and roping in a strategic partner, a complete achievement of financial closure, a marketing agreement for product offtake from the refinery besides a clear upgradation and investment plan.

OOC may enter into an understanding following fulfillment of conditions by Nagarjuna Oil, according to an oil industry observer.

An official spokesperson of the Nagarjuna group said, "We are negotiating with Oman Oil on the terms of the agreement. It is taking a 26 per cent stake in the refinery and we are already in talks to bring in another partner. Also, we have tied up the debt portion of the funds already, and are awaiting financial closure."

Sector analysts said that OOC is trying to ensure that a marketing agreement is in place before committing any investments into the project "makes sense" as Nagarjuna Oil does not have marketing infrastructure in place.

"Since there is already a surplus refining capacity in the country, and refining margins are under tremendous pressure, a marketing agreement needs to be put in place beforehand," an analyst at a local brokerage firm said.

It is expected that the financial institutions will release the funds which will give the green signal for construction of the proposed six-million tonne refinery, once the balance 12 per cent of the equity portion is tied up.

Nagarjuna Oil is currently in talks with Indian Oil and PDVISA, a Venezuelan oil company, for picking up the balance equity in the Rs 3,480 crore refinery.

While Nagarjuna Fertilisers & Chemicals will have a 51 per cent stake in the refinery, the government of Tamil Nadu, the home state for the refinery, will hold a 11 per cent stake through the Tamil Nadu Industrial Development Corporation.

Nagarjuna Fertilisers, which will retain the management control in the refinery, has already invested around Rs 450 crore into the project.