State-run oil marketer Bharat Petroleum Corporation (BPCL), which is setting up its first propylene unit in Kochi, said it was ready to offer 51 per cent stake in the Rs 6,000-crore project to its Korean joint venture partner LG Chemicals.
‘We have already inked an MoU (memorandum of understanding) with LG Chemicals for this project. They are looking at 51 per cent stake in the JV (joint venture) and we are open to that. The JV company will be in place by December or January and the plant will be commissioned by the end of financial year 2017,” BPCL Finance Director S Varadarajan said.
He said the propylene plant is part of the company’s proposed petrochemicals complex planned at Ambalamugal near Kochi, where it also has a 9.5 million tonne oil refinery.
On September 14, BPCL Chairman and Managing Director R K Singh had inked an MoU with Kerala Chief Minister Oommen Chandy at the Emerging Kerala investor summit in Kochi that attracted Rs 2.5 trillion (Rs 2.5 lakh crore) worth proposals, for Rs 20,000-crore investment in the state. Varadarajan said this is the single largest investment by the company so far and involves expansion of the Kochi Refinery capacity to 15.5 million tonne per annum from the present 9.5 million tonne by FY17. The remaining Rs 6,000 crore will go into the greenfield petrochemicals complex.
When asked about the details of tax benefits that Kerala has offered, Varadarajan said, “BPCL will be cumulatively getting Rs 7,500 crore in tax deferments over 15 years since commissioning of the both plants. This works out to be around Rs 500 crore annually.
“But from the 16th year onwards, we will have to start paying back this to the state. So, this practically is loan from the state.” When asked about land acquisition, Varadarajan said BPCL already has almost enough land at the Ambalamugal complex.
“We may probably need just about 70 more acres which the government has with it. Any day the government will transfer that to us,” he said.
He further said both the projects are scheduled to be completed by the end of FY17. Over the weekend, the BPCL Chairman had told reporters after its AGM last Friday that BPCL has lined up a capital expenditure of up to Rs 45,000 crore by 2017 and the Kochi projects are part of this. “In the next four to five years our total capex will be to the tune of around Rs 40,000-45,000 crore. This allocation will be spent on upstream, refinery expansion and other infrastructure development,” Singh had said.
On the fund raising plan for this capex, Singh said raising funds to this magnitude would not be a problem as BPCL is already in talks with the domestic banks.
“We have no problem in mobilising this kind of resources because we have some good discoveries. Many banks are willing to fund our activities,” he said.
For funds for its many exploration projects, Varadarajan said a consortium of domestic banks led by State Bank, is ready to lend. But he added that these will be dollar- dominated borrowings. The company has many gas blocks in Mozambique, 10 oil blocks in Brazil, and some oil and gas blocks in Indonesia, Australia, Britain, East Timor, and a shale gas project. To a question on Cove Energy's stake in resource-rich prospective gas block in Mozambique, which it plans to offload, Singh said BPCL is interested in purchasing Cove's holdings but for high valuation.