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Mr Sarthak Behuria, Chairman & Managing Director, Bharat Petroleum Corporation Ltd, with Mr Ashok Sinha, Director, Finance, at the company's post-AGM press conference held on Monday in Mumbai. - Paul Noronha

Mumbai , Aug. 31

BHARAT Petroleum Corporation Ltd is considering the possibility of merging its subsidiary Kochi Refineries Ltd with itself. A merger with KRL will add the subsidiary's refining profits to BPCL's balance sheet, according to senior officials.

"We will be unable to reveal the why, when and how of the decision (to discuss the merger). But there will be no changes in the capital structure of KRL," Mr Sarthak Behuria, BPCL's Chairman and Managing Director, told reporters at a press conference last night.

The company plans to continue selling KRL products under the BPCL brand name although KRL had asked for permission to set up its own retail network.

The company's plans to set up a 6-million-tonne refinery at Bina in Madhya Pradesh are on track, Mr Behuria said. Equity partner Oman Oil Company has exited from the project, he added.

"We are in the final stages of negotiations with the Madhya Pradesh Government for gaining duty concessions for the refinery. The project should be completed by 2009-10," Mr Behuria said.

The recent customs and excise duty cuts announced by the Union Government will affect Bina's internal rate of return by 2 per cent, he said. The company has also acquired land in Uttar Pradesh for its proposed 7-million-tonne Lohagara refinery.

BPCL hopes it will be able to finalise details of its shareholders agreement for taking over 100-odd retail outlets owned by Ceylon Petroleum in Sri Lanka, within 8-10 weeks, Mr Behuria said.

The company is seeking additional term supplies of crude oil from Malaysia and eyeing a contract with Libya to reduce its dependence on West Asia , the company's chairman said. BPCL, which plans to import 2,00,000 barrels per day in 2004-05, currently has a term contract for 10,000 bpd from Malaysia, Mr Behuria said.

BPCL said it plans to invest Rs 400 crore for setting up gas distribution grids in Kanpur and Pune, in association with GAIL (India). Half the sum will be invested in the Kanpur city gas distribution grid over the next one-and-a-half years, Mr Behuria said.

The company will also invest Rs 200 crore on its exploration blocks in the Krishna-Godavari, Kaveri and Mahanadi basins. The company has already spent Rs 3,000 crore out of its planned five-year capital expenditure of Rs 7,500 crore.

BPCL suffered losses worth Rs 1,270 crore because of kerosene and LPG subsidies last year, though refining margins in India continue to be higher by $1.5-2 per barrel compared to other refineries in Asia, Mr Behuria said.

Crude oil prices have gone up to $43-44 per barrel, leading to higher costs for Indian oil companies, which have been unable to raise product prices in the last three months.

More Stories on : Mergers & Acquisitions | Petroleum

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