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BPCL offers IOC stake in Bina refinery - Views on News from Equitymaster
 
 
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  • Jan 29, 2000

    BPCL offers IOC stake in Bina refinery

    The Bharat Petroleum Corporation (BPCL) has offered a stake in the 7 million tonne per annum Bina refinery to Indian Oil Corporation (IOC).

    IOC is India's largest company. It dominates the oil sector with a 45% refining capacity (almost 32 million tonnes) and a 55% market share. Its distribution network includes 6,779 petrol pumps, 3423 dealers and 2902 LPG distributors.

    BPCL is an integrated oil company with a refining capacity of over 7.3 million tonnes. Its distribution network includes 4,376 petrol pumps, 967 dealers and around 1150 LPG distributors.

    However, BPCL has a single production facility in Mumbai (West India) while it sells almost 18 million tonnes through its all India retail network. So far, BPCL meets its refining requirements through Madras Refineries (South) and Indian Oil Corporation (IOC) for North India but post deregulation this will not happen. Hence the need for an all India refining network.

    The refinery at Bina in Madhya Pradesh was a joint venture with the Oman Oil Company (OOC). However, with OOC not too keen to participate in a grass root refinery in India at this point in time, BPCL requires another partner. Hence the approach towards IOC.

    IOC in turn wants to expand its refining capacity to 88 million tonnes by 2007. It is already working on expanding its refinery in Gujarat from 12 million tonnes to 18 million tonnes. It has further plans of expanding this refinery to 25 million tonnes over the next three yearís. Besides, IOC has also been working on a refinery in the East Coast (which was a joint venture with Kuwait Petroleum Corporation).

    A seven million tonne refinery needs a capital expenditure of Rs 70 bn. Assuming a debt equity of 2:1 the total equity contribution would work out to Rs 23.3 bn. A 26% stake for IOC would mean an investment of over Rs 6 bn. At this stage it is difficult to say whether IOC would take a stake in the Bina refinery.

     

     

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