OIL may pull out of race for Vizag refinery stake

The company is now interested in a greenfield refinery.

Oil India Ltd (OIL), which plans to diversify into downstream and marketing activity from its current core business of exploration and production, is not likely to pick up stake in Hindustan Petroleum Corporation's (HPCL's) upcoming 9-million-tonne refinery at Visakapatnam.

The exploration company's proposal to increase its stake in Bharat Petroleum Corporation's (BPCL's) Numaligarh Refinery (NRL) to 26 per cent from the existing 12.3 per cent has been approved by the government. The value of the transaction has not been revealed.

Oil India Development Board will transfer its entire 12.3 per cent stake in the refinery to OIL, while BPCL will offload 1.4 per cent of its 63.1 per cent majority stake, taking OIL's stake to 26 per cent. The stakes will be transferred to OIL soon.

OIL, the country's second largest government-owned oil and gas exploration and production company, had earlier pulled out of the race for stake in HPCL's under-construction 9-million-tonne per annum refinery in Bathinda, Punjab.

"We have almost decided not to invest in the refinery at Vizag. If the refinery is a greenfield one, we may reconsider, but expansion of the existing refinery will not suit us," a top OIL official said.

The official added a greenfield refinery would give OIL more say in the refinery operations. Participating in the expansion might not allow the company much room on the refinery's board, he said.

HPCL Chairman and Managing Director Arun Balakrishnan recently said in Kuala Lumpur that the company was in talks with Total and Kuwait Petroleum for participation in the refinery project, which was likely to be a greenfield one. News agencies had quoted him as hoping that OIL would join the venture.

OIL plans to enter auto fuel retailing business, "if we get a strong foothold in the refinery sector," the company official said.

Numaliharh Refinery has government approval to set up 510 retail outlets and OIL is expected to cash in on this.

"The auto fuel retail market in the north-east is still quite huge. Moreover, the increased stake in Numaliharh Refinery gives OIL a presence in exploration to refining and now possibly marketing as well," said an analyst tracking the sector.

The country's largest exploration and production company, Oil and Natural Gas Corporation (ONGC), had bought majority stake in Mangalore Refineries and Petrochemicals Ltd (MRPL) in May 2003. MRPL also plans to expand its retailing business, even as ONGC itself has shelved its plans to sell petrol and diesel.