Hyderabad: Nagarjuna Oil Corp. Ltd, a unit of Hyderabad’s Rs1,843 crore Nagarjuna Fertilizers and Chemicals Ltd (NFCL), expects to tie up finances for its refinery by the year-end, marking renewed progress in implementation of the project that was initially scheduled to go on stream in 2002.

Having completed the equity tie-ups early this year for the 6 million tonne (mt) per annum project costing Rs3,625 crore, Nagarjuna Oil has recently given the debt syndication mandate to Industrial Development Bank of India Ltd (IDBI) and State Bank of India Ltd (SBI).

The project, being set up at Cuddalore in Tamil Nadu, has Tata Sons Ltd with a 26% stake, the first time the Tata group is making a foray into refining.

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Of the Rs1,400 crore equity component of the project, NFCL will hold 51% and Russia’s Suntera Resources Ltd 10%, with Tamil Nadu Industrial Development Corp., Export-Import Bank of India and ­Germany’s Uhde GmBH owning the remaining 14%.

“The closure of the debt component of the project is in advanced stage and the company expects to tie up the debt shortly, mostly by the year-end," said NFCL company secretary M. Ramakanth.

He said IDBI has sanctioned a term loan of Rs500 crore, SBI Rs300 crore and Life Insurance Corp. of India Ltd Rs85 crore. IDBI and SBI are expected to syndicate the balance rupee term loan of Rs1,340 crore. “We expect the project to take off in 24-30 months from the date of financial closure," Ramakanth said.

Nagarjuna Oil plans to shift a refinery of Mobil Oil from Woerth, Germany to India. It proposes to first meet the needs of domestic oil companies in both public and private sectors, and then export the balance production.

An analyst with a leading brokerage cautioned prices of refined products could soften in the coming years given that refining capacity crunch world over is expected to ease by about 2011-12 when new capacities come up in West Asia. “If this project (of Nagarjuna Oil) kicks off by next year, it will start operations by 2011-12 when the refining margins would not be as attractive as they are today," the analyst said, requesting anonymity.

India plans to add more than 92mt capacity between fiscal 2008 and 2012, raising the capacity in the country to 240mt a year and further to 302mt by 2017.