IndianOil agrees to pick up stake in Rajasthan refinery
New Delhi   19-Jul-2012

After initial reluctance, state-run oil marketing company IndianOil has agreed to take a stake in the proposed nine-million-tonne refinery in Rajasthan along with its project leader Hindustan Petroleum Corporation (HPCL). Access to the heavy crude from the desert state would improve IndianOil's refining margin.

IndianOil is going to send a written expression of interest to the petroleum ministry soon. IndianOil is keen to participate in the project in the wake of growing investor interest in the project. Recently, Vedanta group chairman Anil Agarwal, who entered the oil and gas business by acquiring Cairn India, met Rajasthan chief minister Ashok Gehlot and expressed his interest to participate in the refinery. Engineers India (EIL) has also expressed interest in taking 5% stake in the project.

“We are going to express our interest to the ministry to own a stake in the project lead by HPCL,” said an IndianOil official. “Many companies interested in picking up stakes in the project, but we will continue to hold 51% to improve our gross refining margins,” a senior HPCL official said.

IndianOil controls 10 of the country's 20 refineries. Its group refining capacity is 65.7 million metric tonnes per annum (MMTPA) or 1.30 million barrels per day — the largest share among refiners in India. The company accounts for 34.8% of the country's refining capacity.

The Barmer refinery was proposed in 2004-05 when Cairn India discovered oil in the Barmer basin in 2004. Cairn India, the operator of the Rajasthan block with a 70% participating interest has approached the oil ministry to ramp up production from it's Rajasthan block to 3,00,000 barrels per day from 1,75,000 barrel per day now.

In the year 2005, the entire field study of the project was done by ONGC but later it backed out as the government norms where not feasible for the refinery. Subsequently in 2009, ONGC was again asked to review the feasibility the project by the petroleum ministry.