Oil India eyes 10-15% stake in HPCL's Barmer refinery

Sources say preliminary talks have been held but nothing has been finalised so far

After Vedanta Resources plc and Engineers India Ltd, state-owned Oil India Ltd has evinced interest in taking a stake in Hindustan Petroleum Corp Ltd's planned nine million tonnes a year refinery in Rajasthan.    

Cash-rich OIL is keen to take up to 10-15% stake in refinery HPCL plans to build near the Barmer oil finds of Cairn India.    

Sources said preliminary discussions have been held but nothing has been finalised so far.    

HPCL is to hold 51% stake in the $4 billion project while state-owned engineering consultancy firm EIL would take 5%.

Vedanta Resources, which last year acquired Cairn India for $8.67 billion, is interested in taking a small equity of up to 5% in the project.

State explorer Oil and Natural Gas Corp (ONGC), which owns 30% interest in the Barmer oilfields of Cairn India, had in 2005 committed to building the refinery in Rajasthan but later had a change of heart.

Sources said after HPCL decided to take up the project, ONGC, which originally had the authorisation from the government for processing the Barmer crude at the proposed refinery, too evinced interest in taking 26% stake.

However, HPCL is not keen on giving anything more than 16.96% to ONGC. This being equivalent to the stake that ONGC has allowed HPCL to hold in Mangalore Refinery and Petrochemicals Ltd.

HPCL was equal promoter of MRPL with Aditya Birla Group but its stake was pruned after ONGC bought out the ABG.

Cairn India, which holds 70% interest in the Barmer oilfields, currently produces 175,000 barrels per day of oil (8.75 million tonnes a year) from the Rajasthan fields and has plans to take it up to 300,000 bpd (15 million tonnes).

Sources said Rajasthan government has started the process of land acquisition of about 926 hectares for the refinery project.

The state government may also take equity in the project besides giving fiscal concessions like 50% exemption in excise duty to make it viable.