HPCL-led Consortium in Talks to Revive $10 Billion Vizag Refinery Project

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Researched by Industrial Info Resources India (Delhi, India)--Hindustan Petroleum Corporation (BSE:500104) (HPCL) (Mumbai, India) is working toward reviving its plans for setting up a grassroots crude oil refinery and petrochemicals plant. The project will be jointly owned by HPCL, Total S.A. (NYSE:TOT) (Paris, France), Mittal Investment Sarl (Luxembourg), and public-sector companies Oil India Limited (BSE:533106) (OIL) (Noida, Uttar Pradesh) and GAIL India Limited (BSE:532155) (New Delhi, India). BP plc (NYSE:BP) (London, England) also has shown interest in taking a stake in the project.

The proposal was first taken up in 2007-08, when a consortium between HPCL, Mittal Investment Sarl, Total S.A., GAIL and OIL was formed to look at the feasibility of setting up a 315,000-barrel-per-day (BBL/d) refinery beside HPCL's existing Vizag refinery. The refinery was to be a completely export-oriented one, aimed at the Southeast Asian and Middle Eastern markets.

The project was stalled in 2009 before the detailed feasibility report was completed, as the demand for the products at the time did not justify such a large investment.

With the commissioning of HPCL-Mittal's 200,000-BBL/d Bathinda refinery, interest in the project has been renewed. HPCL already has acquired 2,500 acres of land and has commissioned Engineers India Limited to prepare a detailed feasibility report.

HPCL is keenly looking forward to expanding its refining business. It is currently working on various proposals of setting up two new refineries and doubling the capacity at its Vizag refinery.

HPCL has sought about 4,000 hectares of land from the Maharashtra government for setting up a new 400,000-BBL/d refinery in the Ratnagiri district. The refinery is expected to be built in two phases of 200,000 BBL/d, at a total cost of $9.5 billion.

The company is also planning to double the capacity at its existing Vizag refinery by adding a 200,000-BBL/d crude distillation unit at a cost of $2 billion. The detailed feasibility report for the project has been completed and, the company is now in the process of obtaining environmental and land clearance for the project.

HPCL currently operates two refineries: one in Mumbai on the west coast, and the other in Visakhapatnam on the east coast. They have a combined nameplate capacity of 335,000 BBL/d, which accounts for less than one-tenth of India's total refining capacity.

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