It was the best way to wrap up this fiscal for Hindustan Petroleum Corporation. The commissioning of the Bhatinda refinery on Thursday more than made up for an otherwise difficult 2011-12, characterised by mounting fuel losses.
The nine million-tonne project will not only help HPCL build its presence in the North, where IndianOil reigns supreme, but will also give it easy access to Pakistan for supply of petro-products. This may well become a reality in the coming months as trade with India eases and all HPCL will need to do is invest in a 100-km-long pipeline from Bhatinda to Lahore.
The long road
While this sounds the perfect script today, it actually took years for HPCL to make this a reality.
The Bhatinda project was first conceived nearly 15 years ago but things started moving only in July 2007 when the top management of HPCL began talks with the LN Mittal group.
The two decided to pick up 49 per cent equity each (Rs 4,000 crore apiece) for which Government approval was quickly sought. In the process, this marked the highest instance of foreign direct investment in an Indian refinery. The debt component for the refinery is around Rs 12,000 crore.
Perfect sync
The last five years saw some real fast action where the HPCL and the L.N. Mittal group were in perfect sync with each other. This was in sharp contrast to the first ten years of conceiving the project when inertia seemed the order of the day. There were expressions of interest in the Bhatinda refinery from big names in the world oil business like Saudi Aramco, Exxon Mobil and BP. They were keen to partner HPCL but nothing came out of these talks eventually.
Strengthening HPCL
From the Indian oil major's point of view though, this project was absolutely imperative from the viewpoint of increasing its refining capacity. Things were not exactly hunky-dory when it literally gifted away Mangalore Refinery & Petrochemicals to the Oil and Natural Gas Corporation in 2003. HPCL was relegated to a marginal partner in MRPL with a 17 per cent stake whereas, at one point, it was in the driver's seat with the AV Birla Group.
Some years earlier, its proposed West Coast refinery planned with Oman Oil in Ratnagiri had to be shelved for a variety of reasons, which meant the ramp-up in refining capacity had to be done in a hurry. The wait was longer than what HPCL would have liked but there was precious little it could do till the meeting with the top management of the L.N. Mittal happened in 2007.
Today, the company is on a stronger wicket with plans underway to increase capacity of its Vizag refinery to over 15 million tonnes. It also proposes to set up a refinery on the West Coast with an initial capacity of nine million tonnes. Over the next 4-5 years, HPCL has targeted total refining capacity of nearly 41 million tonnes which is expected to meet the demand for petro-products prevailing at that time.