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BPCL refuses stake in Essar Oil - Views on News from Equitymaster
 
 
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  • Apr 18, 2000

    BPCL refuses stake in Essar Oil

    Bharat Petroleum (BPCL) has finally decided not to participate in the Essar Oil project. The domestic financial institutions were keen to ensure that BPCL takes a 26% stake in the beleaguered 10.5 million tonne project.

    BPCL has only a single refinery in Mumbai which refines over 7 million tonnes. The company through its refining network however sells around 18 million tonnes primarily by outsourcing from Madras Refineries (to feed its Southern retail outlets) and Indian Oil Coproration (to feed its northern outlets).

    However, post deregulation, the company would need another refinery and it was in this context that BPCL was negotiating with the financial institutions for the 26% stake in Essar Oil. Moreover, the refinery was at the head of the Hazira–Bijapur–Jagdishpur pipeline, which would helped the transportation of the end products from the west coast of India to the heart of the eastern state of Uttar Pradesh.

    However, the non–waiver of the interest costs of over Rs 3 bn as well as the refusal of the financial institutions to finance the project overrun probably made it unfeasible for BPCL to participate in the project.

    Anyway, BPCL has its own 7 million tonne refinery coming up in Bina (Madhya Pradesh). This could also have prompted the company to negotiate harder than what it could otherwise have done.

     

     

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