India’s largest oil refiner,Indian Oil Corporation (IOC), which has embarked on a privatization drive, is hoping that its three projects in Turkey will help it tap the market for petroleum products in that country as well as make inroads into markets in Europe and the US.
IOC’s three projects in the country are a $2 billion (Rs8,600 crore) pipeline from the Black Sea to the Mediterranean Sea, a 15 million tonne per annum (MTPA) refinery that is being built at a cost of $6 billion in Ceyhan, and a planned-bid for a 52-53% stake in Petkim Petrokimya Holdings AS , a petrochemicals complex. The pipeline is expected to ship Caspian crude to the refinery.
To fund its overseas plans, the company has lined up a capital expenditure of Rs 43,000 crore over the period of next five years (2007-12). “On the retailing front, we are looking at countries apart from Turkey, where there are no subsidies given by the government. We are interested in Indonesia along with a few other African countries in Africa,” said BM Bansal, director, planning and business development, IOC .
Ajay Arora of accounting firm Erns and Young termed the Turkey move “workable” and said, “It makes lot of sense due to the rising demand potential in the US market. As no new refineries have been set up in Europe or US in the last 10 years, it is a good move. Turkey, as a part of emerging Europe, offers an ideal location.” IOC is partnering with Eni SpA of Italy and Calik Enerji A.S to set up the 350mile pipeline in which it has a 12.5% equity stake.
“The debt-to-equity ratio for the project is yet to be decided. An IOC team will shortly leave for Turkey to complete the due diligence on the project,” added Bansal. More partners for the pipeline project are being identified and some Japanese firms have shown interest.
While the operator for the pipeline is yet to be decided, the final framework for the project development will be decided by June this year. The pre-feasibility report for the Ceyhan refinery project has been submitted and the refinery is expected to be completed in 2012.
IOC plans to own a 51% majority stake in the greenfield project and is exploring partnership options to build the project. “It will be an export-oriented refinery where a part of the product will be for domestic consumption. The rest will be routed to Europe and the US,” said Bansal. IOC is also looking for opportunities in exploration and production in Turkmenistan and Kazakhstan. It is willing to enter the fuel-retail business in Russia provided if it is offered a stake in exploration and production activities there.