The Hindu Business Line : Engineers India appointed HPCL project consultant

Hindustan Petroleum Corporation Ltd (HPCL) has appointed Engineers India Ltd (EIL) as the project management consultant for implementation of its Bhatinda refinery project.

HPCL's subsidiary Guru Gobind Singh Refineries Ltd is implementing the 9 million metric tonne per annum (MMTPA) grassroots refinery at an estimated cost of Rs 13,800 crore and is scheduled to be completed by September 2010.

Speaking at the occasion, Mr M.B. Lal, Chairman and Managing Director, HPCL, said, "the consultant fee is remunerative enough for EIL and attractive enough for HPCL." However, indications are that the fee would be close to Rs 600 crore. As regards selection of EIL, he said that it was done on nomination basis. Besides, EIL has been already involved with HPCL's Visakhapatnam and Mumbai refinery upgradation projects.

SBI Capital Markets Ltd has carried out financial appraisal and is the lead manager for syndication of rupee term loan requirements for the project, Mr Lal said.

"Financial closure of the project would be the next milestone and is expected to be completed in a month or two," he added.

Strategic partner

He said the project would be financed through a combination of debt-equity of 60:40, with the debt component of little over Rs 8,000 crore. Asked whether the company would opt for a strategic partner for the Bhatinda refinery, Mr Lal said the company was in talks with Oil India Ltd.

He, however, stressed that ``Even as we are on the lookout for a strategic partner, we are committed to executing the Bhatinda project whether on our own or with a strategic partner.''

The company may decide to raise funds for the project through an initial public offering depending upon the situation when the refinery is getting ready to be commissioned, he added.

The crude oil receipt, storage and transfer facilities namely single point mooring, crude oil terminal at Mundra and the 1,011-km crude oil pipeline from Mundra to Bhatinda for supply of crude oil to the refinery will be implemented by HPCL, Mr Lal said.

The refinery has been configured for processing heavy and sour crude to take advantage of the price differentials vis-à-vis light and sweet crude. Refining margins would be higher because of the flexibility to process low cost opportunity crude and produce high-value products, he said.

Currently, HPCL's gross refining margin is around $4 a barrel, he said. During April-September, the first half of the current fiscal year, HPCL's gross refining margin stood at $5.87 a barrel.

The company is augmenting the refining capacity of its Visakhapatnam refinery by 9 MMTPA at an expenditure of Rs 9,000-10,000 crore, Mr Lal said. ``The expansion will be completed in 42 months, after which the refinery will have a capacity of 18 MMTPA,'' he said.