RIL to bid for refinery in Central America

Reliance Industries, which operates the world's third largest refinery at Jamnagar in Gujarat, is preparing to bid for constructing and operating a $7 billion greenfield refinery in Central America.

Four countries - Costa Rica, Guatemala, Honduras and Panama - have shown interest in having the 350,000 barrels a day oil refinery constructed in their territory. The refinery is about half the size of the 660,000 barrels a day refinery that Reliance owns and operates in Jamnagar.

"The idea of a refinery that will cater to the Central American countries was proposed at a presidential meeting of the Central American countries earlier this year," an industry official, who did not want to be named, said.

Besides Reliance, Colombia's Ecopetrol, Japan's Itochu Corporation and the US-based Valero Energy Corporation are vying for the contract to build the refinery, for which Mexico has already promised crude oil supply of 80,000 barrels per day for eight years.

A Reliance spokesperson said the company was on the lookout for a refinery in the US or Central America as the region has a major market for petroleum products. Moreover, Central America is a better option as the environmental norms there are not as stringent as in the US, the spokesperson added.

Reliance exports a majority of its petroleum products such as gasoline to the US market. It is also planning to buy a petroleum marketing company in the North American country, sources said.

"Two of the four companies have already applied for the contract terms, while the other two will apply soon," the industry official said. He, however, did not disclose if Reliance has signed the application.

Once the contract terms are acquired, investors will have 12 months to decide on which country the refinery should be located, the official said. "The actual investment could be more than $7 billion depending on the location and the engineering costs," he added.

The final offers by the four companies are expected to be presented by June 16, 2008.

Central America is heavily dependent on imports for meeting its fuel needs, and has been hit hard by the recent high crude oil prices.

"This will be the biggest refinery in Central America. The products from the refinery will help to lower fuel costs in the region. It will also give Reliance, if it wins the bid, the option to export products to North America," the official said.