The Hindu Business Line : IOC may drop plans to set up refinery in Nigeria

Kolkata, Oct 17 Change in the stance of Nigerian government may finally force IndianOil to drop its plan to set up a grassroots refinery in the oil rich country.

Based on a State invitation, the Indian major had entered into an MoU with the oil rich Edo state of Nigeria for setting up a grassroots refinery on nomination basis, way back in September 2004. The board of directors of IOC also granted a preliminary approval to the project.

IOC on its part wanted a stake in an oilfield – also on nomination basis – in the hydrocarbon rich country. This was to ensure steady feed to the refinery. IOC had also bid for revamping the existing refineries in Nigeria and wanted to enter auto fuel retailing business in the country.

Apparently, the proposal did find favour with the government of the investment starved Edo state, producing Escravos and Forcados grades of crude without much refining capacity.

For more than an year since then hectic negotiations took place between both the parties over a range of issues including the size of the refinery, quantum of investments to be made by IOC, fiscal benefits to be provided by the government and so on.

In August-September 2005, things were nearing finalisation as the proposal to award equity oil stake was cleared by Edo state and all other related authorities of Nigeria. A state communication to IOC suggested that the proposal was awaiting the final Presidential clearance.

But that was the end of the road. After prolonged delays, the Nigerian Government practically scrapped the whole offer.

IOC is now invited to participate in a bidding process to set up the refinery. The company’s demand for equity oil in return to the investment also did not find much favour.

“We are now undecided about our future plan in Nigeria. So far we have stuck to our demand that we are interested in setting up the refinery on nomination basis and against equity oil stake,” a company official said today.

“In case the Nigerian government invites bids for the refinery, we may not participate in the same,” he added.

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