HPCL fast-tracks Punjab refinery

Hindustan Petroleum Corporation (HPCL), the state-owned oil refining and marketing company, has decided to put its Bhatinda refinery in Punjab on fast track. It also plans to commission the same by March 2011, a year ahead of schedule, HPCL’s Chairman and Managing Director Arun Balakrishnan told shareholders at its AGM on Monday.

The company is also looking at increasing the production capacity of the refinery from the planned 9 million tonnes per annum to 11 million tonnes.

“This refinery will give us access to a huge market in the north. While we will be able to sell around 70 per cent of the products in Punjab, the rest will be distributed in Delhi and nearby cities,” added the company official without disclosing details.

HPCL and L N Mittal’s Mittal Energy hold 49 per cent stake each in the refinery with the rest owned by financial institutions. The project is being financed in a 1.5:1 debt-equity ratio with an equity investment of Rs 3,577.50 crore each by Mittal and HPCL.

The refinery project was approved more than a decade back but was delayed because of HPCL’s inability to finalise a partner. Subsequently, the company signed separate agreements with Saudi Aramco and British Petroleum (BP).

Europe’s second largest oil producer.

But both the global majors pulled out questioning commercial viability of the project.

The current joint venture with Mittal Energy was signed last year.

In addition, HPCL-Mittal combine is also laying a 1,100-km crude oil pipeline from Mundra port in Gujarat to Bhatinda and building a crude oil terminal and associated facilities at an estimated cost of around Rs 2,700 crore.

The third-largest state-run refiner, which is incurring losses by selling petrol, diesel and kerosene at below-production cost, has planned a capital expenditure of around Rs 3,000 crore for FY09. It was not disclosed how much the company will spend towards the refinery.

“The company plans to spend around Rs 2,000 crore towards exploration and production alone in the next five years,” an official had told Business Standard earlier.