Aramco, Oil India likely to pick up stake in BPCL's Andhra refinery

State-run BPCL is setting up a greenfield refinery and petrochemicals project near Ramayapatnam port in Nellore district to meet rising domestic demand and boost petrochemical exports

State-owned Bharat Petroleum Corporation Ltd (BPCL) is willing to dilute a 30–40 per cent stake in its upcoming greenfield refinery in Andhra Pradesh, with Gulf energy major Saudi Aramco and upstream player Oil India Ltd (OIL) likely to join as partners, a senior BPCL executive told Business Standard. 

Aramco is expected to pick up a minority stake of about 20 per cent, while OIL may take around 10 per cent. BPCL may also divest 4-5 per cent to banks that have expressed interest in the project, the executive said. 

Queries sent to BPCL and Oil India seeking comment remained unanswered at the time of publication. Saudi Aramco declined to comment. 

BPCL is setting up the refinery and petrochemical project near Ramayapatnam port in Nellore district to cater to rising domestic demand and expand petrochemical exports. The Andhra Pradesh government has allotted 6,000 acres for the project. “The final negotiations on investment will be taken after completion of the detailed feasibility report (DFR), which will give us the final cost of the project,” the executive said. 

The feasibility report is expected to be completed by the end of February. BPCL has estimated the project cost at over ₹96,000 crore and proposed an operational capacity of 9-12 million tonnes per annum (mtpa). 

The final investment cost could vary by as much as 30 per cent from initial estimates, the source said. “The design and configuration of a big refinery takes time. The project will have higher petrochemical capacity due to higher demand.” 

BPCL has been in talks with foreign players, including Saudi Arabia, for investment in the proposed refinery.  

In 2019, Saudi Arabia signed a memorandum of understanding with India, announcing plans to invest $100 billion across sectors such as energy, agriculture, infrastructure and manufacturing. Those investments are yet to materialise. 

In October, BPCL also signed a memorandum of understanding (MoU) with Oil India to explore collaboration as a strategic alliance in building the Andhra refinery, including the possibility of OIL taking a minority equity stake. 

BPCL is India’s second-largest oil marketing company, with domestic sales of 52.4 million tonnes and a market share of 27.44 per cent in the last financial year. It operates the country’s third-largest refining capacity, about 14 per cent of the national total, through refineries in Mumbai, Kochi and Bina.

 

India’s refining hub goal 

India, the world’s fourth-largest oil refiner, is seeking to expand capacity amid strong growth in fuel and petrochemical demand. The government’s earlier plan for a 60 mmtpa refinery in Ratnagiri, Maharashtra, was shelved because of land acquisition hurdles.

Subsequently, the oil ministry directed state-run oil marketing companies to develop smaller refineries of 20-25 mtpa. The government aims to raise India’s total refining capacity to 450 mtpa by 2030, from about 250 mtpa at present, through a mix of new projects and expansions.