New Delhi: Hindustan Petroleum Corporation and its partners will decide by November on the project structure and funding of the proposed 14-15 million tonnes a year refinery-cum-petrochemical plant at Vizag in Andhra Pradesh.
The five-way alliance of HPCL, steel czar Lakshmi N Mittal, French energy giant Total, gas utility GAIL and Oil India Ltd are currently doing pre-feasibility study for the project that may cost at least & $6 billion.
“We should have project structure and refinery configuration ready by end October or November to make the investment decision,” a source in the joint venture said.
The joint venture will by November freeze cost of the refinery after the pre-feasibility study is completed and will then decide on the equity structure of the project.
“Most likely, it will be a 14-15 million tonnes export-oriented refinery. We are studying the demand for petrochemicals and their markets to decide if a naphtha-based petrochemical unit should be constructed along with the refinery,” the source said.
The five companies have only signed an MoU and equity structure would be decided after the completion of pre-feasibility study.
The pre-feasibility report that is looking at demand in India and Asia and project economies, will be ready by end of third quarter of 2008 after which the steering committee of the five partners will meet to decide if the project is to be taken up, he said.
If the project goes through, this will be Mittal’s second refinery venture in India after he picked 49% stake in HPCL’s greenfield refinery at Bhatinda in Punjab that is set for commissioning by early 2012.
Mittal Investment Sarl, which holds Mittal family’s interest in ArcelorMittal, Total, GAIL, HPCL and OIL had in October signed a memorandum of understanding to look at the feasibility of setting up the project.
The refinery was earlier planned for 15 million tonnes per annum capacity, but may be scaled down to 14 million tonnes, the source said.
Total is leading the project feasibility and demand studies, while GAIL is in charge of the study of the petrochemical unit.
He said the exact equity structure and project finances would be decided only after the feasibility studies are completed.
About 2,500 acres of land near HPCL’s existing 7.5 million tonnes a year refinery at Vizag has been acquired for the project.
“The plant in all probability would be an export-oriented unit and fuel produced by the refinery would be exported to markets in South-East Asia and Middle East,” he said, adding that the product demand in Asia is likely to rise by 5 million barrels a day in 10 years from now.
While the refinery would be built to process sour and heavy crudes, which are cheaper than low-sulphur sweat crude oil, the petrochemical plant may use the naphtha produced in the refinery as feedstock.