HPCL, ONGC May Partner to Build Rajasthan’s First Refinery -Executives

Hindustan Petroleum Corp. and Oil & Natural Gas Corp. are considering a plan to build Rajasthan’s first-ever refinery in partnership with the state government.The proposed refinery at Barmer, about 500 kilometers west of Jaipur, could have an initial capacity of 120,000 barrels a day, former federal oil secretary S.C. Tripathi said Thursday. Its completion would allow HPCL, the state-run refiner and fuel retailer, to meet demand for fuel products in the northwestern desert state.Cairn currently produces 175,000 barrels a day of crude from the block, transporting it to refiners through pipelines. Cairn holds 70% of the block, while ONGC holds the remainder.ONGC and the Rajasthan government have been mulling the project since Cairn started producing crude at Barmer in August 2009, but it wasn’t found to be financially viable without tax incentives and interest-free loans from the Rajasthan government.The state government, which faces local elections next year, is negotiation with the other partners on financial incentives, and a final decision by the stakeholders is expected in next few months, said an ONGC executive, who didn’t want to be named.The Rajasthan government’s petroleum directorate couldn’t be reached for comment.”The refinery is an aspiration of the Rajasthan government,” said Mr. Tripathi, who headed a committee in 2010 that recommended construction of a refinery in Barmer with a first-phase capacity of 120,000 barrels a day. “Considering infrastructure constraints, it will be a difficult proposal but can be made possible with the government assistance.”The capacity would need to be expanded to up to 240,000 barrels a day later to make it feasible, he said.HPCL currently has two refineries–a 130,000-barrel-a-day unit in Mumbai and a 166,000-barrel-a-day refinery on the east coast, in Visakhapatnam.In April, it commercially launched a 180,000-barrel-a-day refinery in partnership with billionaire Lakshmi Niwas Mittal in the northern state of Punjab.HPCL’s Murali declined to discuss the capacity of the proposed refinery or the likely size of HPCL’s stake in the project.The ONGC executive said HPCL may take a 51% stake, while ONGC and Rajasthan government are willing to take up to 26% each.State-run Engineers India Ltd., which may be given the contract to build the refinery, has proposed taking a 5% stake in the project, Chairman A.K. Purwaha said.The Rajasthan government is in talks with potential founders and oil marketing companies to finalize the project, according to the website of Rajasthan’s petroleum directorate.