OIL eyes majority stake in Numaligarh refinery

Oil India Ltd (OIL), the country's second-largest government-owned oil and gas exploration company, is looking at acquiring a majority stake in Bharat Petroleum Corporation Ltd's (BPCL's) Numaligarh Refinery Ltd (NRL) in Assam.

The exploration company recently increased its stake in NRL to 26 per cent from 12.3 per cent by buying the entire 12.3 per cent stake of Oil India Development Board. It also bought 1.4 per cent of stake from BPCL. The stakes will be transferred to OIL soon.

"We are keen on acquiring the majority stake NRL, which will enable us to integrate our upstream business with the refinery. Since all our crude oil production is in the North-East, it makes sense to own a refinery in the state," an official said.

The official, however, did not disclose the investment that would go into gaining control of the 3-million tonnes per annum (mtpa) refinery.

OIL also plans to enter into auto fuel retail provided it got a strong foothold in the refinery sector, the official added.

NRL has permision to open 510 auto-fuel outlets, which is an added incentive for OIL. "The auto fuel retail market in the North-East is huge. Moreover, an increased stake in NRL would provide OIL a presence in exploration and refining and now possibly marketing as well," said an analyst tracking the sector.

Another government upstream company, Oil and Natural Gas Corporation (ONGC)), had bought a majority stake in Mangalore Refineries and Petrochemicals Ltd (MRPL) in May 2003.

OIL had earlier pulled out of the race for stake in Hindustan Petroleum Ltd's (HPCL's) under-construction 9 mtpa refinery at Bathinda in Punjab after the latter decided to partner steel baron LN Mittal. It is also likely to decide against picking up stake in HPCL's proposed 9 mtpa refinery and petrochemical plant in Vishakapatnam.

OIL decided against buying into the two refineries as it feared it would not have a strong presence on the boards of the implementing companies.

"What we want is board presence along with business synergy. We are now keen on NRL," the OIL official said.

However, it remains to be seen if the petroleum ministry will approve OIL's purchase of majority stake in NRL. The petroleum ministry has often said that the country's oil companies should focus on their core business instead of integrating upstream and downstream businesses.