By Nidhi Verma
New Delhi: Steel tycoon Lakshmi Mittal has made his first move into the oil refining sector, buying a 49% stake valued at $728 million in a new Indian unit shunned by BP almost a year ago, India’s oil minister said today.
Mittal Investments, part of a group that includes Arcelor Mittal, the world’s top steel firm, will invest in a refinery being built by Hindustan Petroleum Corp. Ltd, which will also own 49%, a ministry official said.
A senior HPCL official said the investment had to be approved by two top government committees.
The move will help advance the 180,000 barrel per day (bpd) Bhatinda plant, one of a host of Indian projects to turn Asia’s third-largest oil consumer into a leading world refining centre — and contributing to fears by some major oil companies that the world will build more capacity than it needs by 2010.
“Mittals have taken a 49% stake while 2% will be (held) by financial institutions,” minister Murli Deora told Reuters. “HPCL and Mittals are seriously discussing jointly exploring overseas opportunities.”
HPCL’s tiny upstream unit Prize Petroleum Ltd. has yet to have much success in the upstream, while Mittal’s joint-venture with Oil and Natural Gas Corp., India’s leading state-run exploration company, has secured some acreage in places such as Nigeria and possibly Kazakhstan.
Despite the allure of access to India’s billion-plus market, BP Plc. last March quit plans to help build the new refinery, then valued at $3 billion, fearing India’s policy of keeping domestic fuel prices low would hand it losses.
Macquarie Securities India Ltd. associate director Jal Irani said Mittal’s interest in the project would boost confidence in HPCL, which has been looking for a partner since 2005.
“This is a step in the right direction for Hindustan Petroleum as it will get the project off the ground at least,” Irani said. “But at the moment we do not see any significant change in the company’s fundamentals as it needs to be seen how much value can be created from this deal.”
Indian state-run oil marketing firms are losing millions of rupees every month due to government-imposed price controls on sales of petrol and diesel.
Global oil majors have been eyeing India’s refining sector as Asia’s third-largest oil consumer hopes to become an export hub.
HPCL Chairman M.B. Lal earlier said Total was interested in a stake in the firm’s refinery in southern India.
India plans to raise its refining capacity by 62% in 2007-12 to 4.82 million barrels a day. REUTERS
Additional reporting by Hiral Vora in Mumbai