India asks Hindustan Petroleum to revive refinery-petchem project

By Ajoy K Das

KOLKATA (ICIS)–The government has asked oil refiner-marketer, Hindustan Petroleum Corporation Limited (HPCL), to revive the $8bn (€5.8bn) refinery cum petrochemical project in southern Indian province of Andhra Pradesh, a petroleum and natural gas ministry official said on Friday.

HPCL, majority owned by the government, has been asked to prepare a fresh report on demand assessment and plant configuration by March 2014 and seek collaboration with oil and gas infrastructure company, GAIL India Limited, to implement the project, the official said.

The government has suggested that HPCL and GAIL fund 60% of the project while an overseas partner be roped in as a strategic investor to finance the rest, the official added.

The complex will be located at Kakinada where the provincial government of Andhra Pradesh has already allocated 5,000 acres of land, he added.

Officials in Andhra Pradesh government said that the federal government’s intervention in getting HPCL to revive the project was aimed to ensure flow of public investment into the region in the wake of the decision to bifurcate Andhra Pradesh and creation of a new Telengana province.

The Indian Cabinet has already approved the bifurcation by carving out 10 out of the 23 districts to create the new province of Telengana. The legislative process at the central and provincial level was currently going on and creation of the new province was expected to be complete by next year.

Officials said the HPCL’s project was part of the government’s approach to all the large public sector companies to invest in Andhra Pradesh, after bifurcation.

HPCL’s refinery cum petrochemical project was first conceived in 2007.

However, it did not take off since the company failed to attract any foreign investor because of the clouded investment climate following the global financial crisis. This time around though, the government expects investment climate to have greatly improved.

Last year, the Andhra Pradesh government cancelled the allotment of 1,500 acres of land after HPCL defaulted in commencing the project work as per memorandum of understanding (MoU) signed between the two entities.

($1 = €0.73)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections