Oman firm likely to exit Bina refinery as BPCL gears up for divestment

Bharat Oman Refineries (BORL) may get merged with BPCL post-Oman's exit

With state-run Bharat Petroleum Corporation (BPCL) gearing up for divestment, its joint venture in Madhya Pradesh, Bharat Oman Refineries (BORL), may see the exit of overseas partner OQ, the national petroleum investment company of Oman, which may give up its stake to BPCL.

BPCL holds 63.38 per cent in BORL. OQ was previously known as the Oman Oil Company (OOC). BORL became a subsidiary of BPCL on March 22 this year. Before that, it was an equal joint venture between BPCL and Oman Oil. According to three sources close to the development, if Oman Oil is willing and the deal happens on agreeable terms, a transaction is expected before the divestment process is over.

“This is still in its initial stages. There is no written communication from Oman’s side so far. However, it makes sense from BPCL’s point of view to merge that company,” said a source aware of the development.

OQ did not respond to questions from Business Standard. A source indicated it was not keen on becoming a minority partner of another overseas player or an Indian private company.

In the preliminary information memorandum (PIM), shared with the possible investors in BPCL on March 7, it was highlighted that BPCL had subscribed to zero per cent compulsorily convertible debentures of Rs 1,000 crore and share warrants of Rs 1,585.68 crore, which, on conversion, would result in BORL becoming a subsidiary of BPCL. Within a fortnight, those warrants were converted into share capital and BORL became a subsidiary of BPCL. After this, the shareholding of BPCL in BORL increased from 50 per cent to 63.38 per cent. On March 31, 2019, BORL had authorised share capital of Rs 7,000 crore and paid-up equity share capital of Rs 1,777.23 crore, with both BPCL and OOC being equal partners.

“This is a diplomatic matter. There are sensitivities to this. It was a diplomatic initiative between the governments of India and Oman at that time, and it culminated in this project. So, it has to be handled delicately. We are looking at several possibilities to make BORL more attractive from BPCL’s point of view. Hence, a Kochi-kind of possibility is very much there, though it is premature,” said another source. 

Cochin Refineries was a joint venture between the government and Phillips Petroleum Corporation of the United States. There the government had sold its 55 per cent stake to BPCL for around Rs 800 crore and later it got merged with the company as it took over the Phillips Petroleum stake too.

On the other hand, there is concern on BORL as to whether it will be treated as a public sector undertaking for the current financial year or it will be sold in the current format as the PIM issued was before the increase of stake. 

The employees of BORL are yet to get the benefits similar to BPCL or other PSU employees. It is still following the guidelines and regulations applicable to the private sector. “We have increased the stake. In a matter of time, it will be categorised as a subsidiary. If the disinvestment happens, it will be sold like this. Currently, it is in the transition stage. It is like a state-less individual now,” said another official. 

BPCL has given a loan of Rs 1,254.10 crore to the company, while the Madhya Pradesh government has also subscribed to Rs 26.90 crore of share warrants in it, in return for the land it offered to the project.