After initial hesitation, Oman Oil Company is now keen on increasing its stake in Bharat Petroleum Corp Ltd's Bina refinery project to 26 per cent and is ready to pay $250 million for the same.
OOC, the oil-rich Gulf nation's national oil company, has so far invested Rs 75 crore for a two per cent stake in Bharat Oman Refineries Ltd - the company that is building the six million-tonnes-a-year refinery at Bina in Madhya Pradesh at a cost of Rs 10,400 crore.
"We want to increase our equity (in the project) to 25-26 per cent. We are in discussions with BPCL," Oman Oil Minister Mohammed bin Hamad Al-Rumhy told reporters here.
Bina refinery project was originally mooted in 1994 with BPCL and OOC having 26 per cent stake each and the rest going to public and strategic investor.
However, OOC did not make any equity contribution beyond Rs 75 crore and asked BPCL to convert it into equity which came to about two per cent in the revised project cost.
The reluctance of OOC forced BPCL to go to the Government for allowing it to raise its stake in the project up to 50 per cent and construction began in 2006.
The project is to be funded by Rs 4,000 crore equity and Rs 6,400 crore debt.
A BPCL official said since the project was nearing completion, the company has decided to offer a 26 per cent stake to OOC again, but this time it would be at premium.
The company has tied up the debt portion of the project that is expected to be commissioned in December 2009. Besides its share, BPCL is also advancing the equity share of its prospective partner as loan as tying-up of full equity was important to tie up the loan.
"We are talking to BPCL and as far as we are concerned an agreement can be reached by next week," Al-Rumhy said.
The BPCL official said a 26 per cent stake was available to OOC but it will have to pay a premium now.
A 26 per cent stake at par would entail an investment of Rs 1,040 crore while the OOC offer of $250 million comes to Rs 1,250 crore. It was not immediately clear if the offer of $250 million was acceptable to BPCL.
BORL is setting up a six-million-tonne per annum grassroot refinery at Bina, in Sagar district of Madhya Pradesh, along with crude supply system consisting of a Single Point Mooring system (SPM), crude oil storage terminal at Vadinar in Jamnagar district of Gujarat and a 935 km long cross country crude pipeline from Vadinar to Bina.
The refinery is being designed to process Arab Mix crude (65 per cent Arab Light and 35 per cent Arab Heavy) but it will also have the flexibility to process other types of Middle East crude.
The BPCL official said the refinery may commission a crude unit at the Bina refinery in August. The crude distillation unit, capable of processing six million tonnes of oil into fuel a year, or 120,000 barrels a day, and a vacuum distillation unit would be the first to be commissioned.
"The refinery is 94 per cent complete and it will be fully operational by the end of December," he said.
Oman, the largest Arab oil producer that isn't a member of the Organisation of Petroleum Exporting Countries, said it was against very high and very low crude oil prices as they hurt producers and consumers alike.
"Oil prices of about $55 (to) $70 per barrel is reasonable¿ its okay if they don't begun to exceed $80 a barrel," Al-Rumhy said.
He said the Opec decision last week to leave production targets unchanged was a good one.
"Low oil prices hinder investment and creates problems for the future," Al-Rumhy said adding high oil prices hurt consumers.
