The Hindu Business Line : BPCL in talks with Reliance for long-term purchase agreement

BHARAT Petroleum Corporation is negotiating a five-year agreement with Reliance Industries to buy products from its Jamnagar refinery. A previous product-sourcing agreement between the two companies expires on March 31, 2004.

Destined for the North Indian market, where BPCL does not have refining capacity, the company hopes to source roughly three million tonnes of petroleum products. Although the oil marketing company is also negotiating with Indian Oil Corporation for a similar agreement, it would settle for a long-term pact with Reliance if it gets better rates.

"We are discussing how much we will buy and at what rate. They (RIL) did talk of a take-or-pay but we did not agree. If RIL offers competitive terms we would like to enter a long-term agreement with them," a senior BPCL official told Business Line. Reliance operates a 32-million-tonne refinery at Jamnagar on the Gujarat coast.

Oil marketing companies Indian Oil, BPCL, HPCL and IBP have until last year ensured product availability in areas where they do not have refineries or storage, by sourcing products from one another. They were also sourcing 13 million tonnes of products from Reliance under the two-year arrangement that ends this March.

The companies went by a multilateral pact called the `Industry logistics plan' under which products were proportionately allocated from the nearest refinery to all retail outlets in the area.

The scene changed when the sector was deregulated in April 2002. Now companies claim they have become more competitive in the retail market. "This year new bilateral agreements will replace the multilateral pact. Also, we are talking of tonne-to-tonne agreements to suit individual requirements. In the North and West, BPCL will buy from IOC, HPCL and Reliance and carry some products from its Trombay refinery through the Mumbai-Manmad-Indore pipeline. In the South and East we have Kochi Refineries and Numaligarh Refinery," the official said.

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