Lohagara To House Shell Refinery

After a two-year search for a suitable location for its seven-million tonne per annum (mmtpa) grassroots refinery, Royal/ Dutch Shell and its partner Bharat Petroleum Corporation Ltd (BPCL) have zeroed down to Lohagara, 35 km south east of Allahabad. The joint venture will soon make a presentation to the government in this regard.

The site has been selected at the behest of Shell as it had earlier rejected BPCL's proposal of setting up the refinery at Kathaura, near Sultanpur in Lucknow. It is understood that the proposal was rejected on reports of water logging near the site as well as the high costs in relocating the inhabitants of the area. Shell also wanted to avoid environment-related litigation.

 

"After considering the pros and cons, Lohagara has been selected from the three sites surveyed by Shell," say sources. The other sites considered were Hamirpur, south of Kanpur and Fatehpur.

Shell and BPCL will hold a 26 per cent stake each in the refinery project. The remaining 48 per cent will be held by institutions and the public. The refinery project, estimated at a cost of Rs 7,070 crore (price estimated as on March 1997), also includes setting up of a marketing terminal and crude import facilities. The cost includes a foreign exchange component of Rs 2,020 crore.

Though the logistics for Lohagara and BPCL's proposed Kathaura site remain the same, the former has got the nod primarily because of the rocky nature of the soil and also to circumvent the environment aspect connected with laying of crude pipeline, say industry sources.

The joint venture is expected to gain considerably following the new site. Due to the rocky nature of the soil, fewer people need to be relocated and thus the complications and costs involved are less, sources add. The new site will also mean eliminating the need for a pipeline passing through the Ganges and Yamuna. "This will not only avoid the necessity for seeking environment clearance but also result in cost saving. Rough estimates indicate that the pipeline will be shorter by at least 60 kms," say sources. Both BPCL and Shell officials were not available for comment.

Sources claim that the steering committee comprising senior officials of Shell and BPCL is expected to formally meet and discuss the location before making a presentation to the government.

The joint venture has received a letter of intent for setting up the refinery in Uttar Pradesh and government approval for foreign direct investment.

Shell has regained a foothold in India through its partnership with BPCL. With the deregulation of the petroleum sector on the cards, Shell is aggressive in spreading its wings in the Indian market.