New Delhi: India-born billionaire Lakshmi N Mittal, who has ambitions to expand his steel empire into oil and gas business, plans to invest billions of dollars in acquiring stake in refineries across the world.
Mittal Investment Sarl, the Luxembourg-registered Mittal family firm that holds 38% stake in Mittal Steel, is investing over Rs3,300 crore for taking 49% stake in Hindustan Petroleum Corp’s Rs 16,700 crore Bhatinda refinery in Punjab, and has bid for taking a majority 51% stake in a Nigerian refinery. “We will sign a joint venture agreement with Mittals for Bhatinda refinery on March 2,” chairman and managing director M B Lal said.
Mittals have also formed a 50:50 joint venture with HPCL to bid for 51% stake in the 9 million tonnes Port Harcourt refinery in Nigeria, where the government has invited expression of interest for a strategic partner.
“We needed Mittals to give the financial muscle to the Bhatinda refinery. They have a vast presence across the globe which we will be using for acquiring refineries and natural gas business (LNG projects),” Lal said. Mittal Investment and HPCL will hold 49% stake each in the Guru Gobind Singh Refinery Ltd, the company implementing the 9 million tonne per annum Bhatinda refinery project. The remaining two per cent will be given to FIs. Petroleum Secretary M S Srinivasan said state-run oil explorer Oil India Ltd (OIL) may join the project at a later date.
Lal said the two sides were also discussing Mittal’s partnership in HPCL’s Vizag petrochemical complex and added an initial public offering (IPO) for Bhatinda project was not in offing as of now.
Mittal is the latest in a series of potential joint venture partners HPCL has had for the Bhatinda refinery. BP Plc of UK walked out of the project in March 2006. Earlier, Saudi Aramco of Saudi Arabia had exited the project in 1998.
The total project cost is about Rs 16,700 crore, including Rs 3,500 crore for a pipeline. HPCL-Mittal combine would lay a 1,100-km crude oil pipeline from Mundra port in Gujarat to Bhatinda and build a crude oil terminal.
Sources said once a joint venture agreement was signed, Mittal Investments would be required to deposit 100 million dollars in an escrow account. The amount could be withdrawn only if the government rejects the joint venture.
The approval of the Foreign Investment Promotion Board (FIPB) and Cabinet Committee on Economic Affairs (CCEA) are pre-requisites to the formation of the joint venture as both the companies would invest over Rs 1,000 crore. HPCL has already invested about Rs 500 crore in the Bhatinda project.
Also, at present the FDI limit in public sector refineries is 26 per cent and oil ministry has requested for increasing the limit to 49 per cent. Srinivasan said: “We are confident that this being the first such case, it will get favourable consideration from FIPB.”
In the event of a possible divestment of stake by HPCL, Mittal will have the option to buy the shares at a price determined by experts. Should Mittal declines, then the shares can be sold to a third party.
Sources said Mittal-HPCL may also build a plant to convert natural gas into its liquefied form at Nigeria. The two companies are talking to the Nigerian government for allocation of an oil and gas field so as to feed the refinery and the LNG plant.
The Mittals may extend the partnership with HPCL to include participation in the expansion of 7.5 million tonnes a year Vizag refinery in Andhra Pradesh and joint pursuit of oil assets abroad. HPCL has already invested about Rs 500 crore in the Bhatinda project.