HPCL, GAIL sign pact with AP for Rs 40K cr petrochem project

State-owned refiner Hindustan Petroleum Corp Ltd (HPCL) and gas utility GAIL India Ltd today signed a pact with Andhra Government for setting up a Rs 40,000 crore petrochemical plant in the state.
The 50:50 joint venture will set up a 1.5 million tons Ethylene Derivatives plant, which will produce a wide range of petrochemical raw materials for the manufacture of detergents, paints and coatings, cosmetics, textiles and adhesives.
"What we have signed is an MoU expressing intent for setting up the petrochemical plant," GAIL Chairman and Manging Director B C Tripathi told PTI.
Andhra Pradesh government will support the project by providing infrastructure, power, roads and other clearances.

The plant will be set up at the Petroleum, Chemical and Petrochemicals Investment Region (PCPIR) sites identified by the state government at Kakinada.
The MoU was signed by Tripathi, HPCL Chairman and Managing Director Mukesh K Surana and Kartikeya Misra, Director, Industries in Government of Andhra Pradesh.

GAIL-HPCL combine may divest half of the project stake in favour of a strategic partner at a later date. Some global petrochem companies have shown interest in the project but talks are at preliminary stages currently, Tripathi said without disclosing details.
The project is a truncated version of the earlier proposed refinery-cum-petrochemicals complex in Andhra Pradesh. HPCL has for the time being shelved plans to build a new refinery and is only pursuing petrochemical project.

HPCL and GAIL decided to do the petrochem plan together after their plans to team up with France's Total, Lakshmi N Mittal Group and Oil India Ltd (OIL) for a 15 million tonnes a year refinery-cum-petrochemical plant at Visakhapatnam in Andhra Pradesh fell through.
Tripathi said currently detailed feasibility report (DFR) is being prepared and details will work out following that.
HPCL had in 2007-08 planned an only-for-exports refinery to target demand in South East Asia and the Middle East.
The five-way alliance of HPCL, explorer OIL, gas utility GAIL India, Mittal Investment Sarl and Total had in October 2007 signed a memorandum of understanding to look at the feasibility of setting up the Vizag project.

In 2009, the Rs 50,000 crore project was put on hold as petrochemical demand then was seen as too weak to justify the investment.
Total did pre-feasibility for the refinery project and demand studies, while GAIL was in charge of the study of the petrochemical unit.
But the project was in 2010 put on back burner before equity structure could be decided.