BPCL has decided to go it alone for the nine million tonne refinery project at Bina.
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, the company BPCL has a single production facility in Mumbai (West India) while it sells almost 18 million tonnes through its all India retail network.
The Bina refinery (in Madhya Pradesh) is a necessity for BPCL since the company needs to have a refinery, which can serve its Northern and Eastern retail outlets. So far it has been sourcing refinery products from the Indian Oil Corporation (IOC) for meeting its requirements.
However, post deregulation this will not be possible since each of the three retail marketing companies viz. IOC, BPCL and Hindustan Petroleum (HPCL) would need to have their own refining network for servicing their retail marketing network to the fullest.
The margins at the marketing end are estimated to rise by almost 200% once marketing is deregulated. The refinery at Bina in Madhya Pradesh was originally a joint venture with the Oman Oil Company (OOC). However, with OOC not too keen to participate in the joint venture BPCL has decided to go it alone.
There were also rumours that BPCL was looking for another partner (reportedly IOC) for taking up a stake. However we had commented in an earlier story that this was unlikely since IOC has a refinery of its own coming up in eastern India apart from expansion of its refinery in Gujarat.
A nine million tonne refinery would involve a capital expenditure of around Rs 90 bn. Assuming a debt equity of 2:1 the total equity contribution would work out to Rs 30 bn. Depending on the stake that BPCL plans to have in the refinery it would envisage an investment in the range of Rs 15 bn to Rs 20 bn spread over a period of five years.
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