Indian Joint Ventures Putting $10 Billion into Refining, Petrochemicals

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Researched by Industrial Info Resources (Sugar Land, Texas)--The diverse network of major project development deals between Indian-based or Indian-connected companies continues with a memorandum of understanding signed between Hindustan Petroleum (HPCL), Mittal Investments (Luxembourg) and Total (NYSE:TOT ) (Paris, France) to construct a $6 billion oil refinery and petrochemical complex at Vishakhapatnam near HPCL's existing site at Vizag. GAIL, India's state-owned gas utility, and oil-exploration company Oil India will also have stakes in the 15 million-ton-per-annum (TPA), or 310,000 barrels per day (BPD), complex.

The signing by the five partners will be followed by a feasibility study to be carried out by GAIL on the petrochemicals unit that is specified to produce 1 million TPA of petrochemicals. Total will conduct a feasibility study for the oil refinery project. No schedule has been set for the construction of the project, and cost estimates will come after the conclusion of the feasibility studies. The details of the equity structure between the partners will also be decided at that time.

About 2,500 acres of land have been acquired for the project near HPCL's existing 7.5 million TPA (150,000 bpd) refinery at Vizag. Mittal already has a 49% stake in HPCL's refinery at Bhatinda and has formed joint ventures with India's ONGC (Oil and Natural Gas Corp) to acquire land for oil and gas transportation projects.

It is probable that a special economic zone will be created for the new project and that fuel and petrochemical products will be exported to Southeast Asia and the Middle East. The refinery will be built to process sour and heavy crude grades of oil that is cheaper than low-sulfur sweet crude oil. Naphtha produced at the refinery could be used as feed for the petrochemical plant.

GAIL, currently earning 50% of its revenue from gas, is planning $4 billion projects to expand in the chemical sector to offset a slowing in profits growth caused by government-controlled caps on gas prices introduced in September. The company is looking for partners for two 1 million-TPA ethylene plants to be built in southern India and overseas. Talks are now taking place between GAIL and Reliance Industries, the Indian Oil Corporation and HPCL. Possible sites for the overseas plant are in the Middle East, Russia or Egypt.

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