New Delhi, July 27: Oil-rich Kuwait is in talks with Indian Oil Corporation (IOC) to invest in its Paradip refinery project.
Sources said the Gulf nation was also keen on picking up a stake in the proposed petrochemical project.
“We are discussing details of their (Kuwait Petroleum Corp) participation, whether they are interested in taking a stake in the refinery or in the petrochemical project or both is what we are discussing now,” a senior IOC official said.
However, Kuwait wants to sign an exclusive crude supply agreement with IOC for 10 years. Besides, the amount of stake to be picked up by Kuwait Petroleum Corp may prove to be a stumbling block.
“If the equity participation is subject to the refinery buying all or most of its crude oil requirement from Kuwait, that will be a big no-no from us as we don’t want to tie ourselves down to just one supplier,” the official added.
The official said the state-owned company did not want to part with more than a 26 per cent stake in the project, while the Gulf nation was eyeing a larger stake.
The 15-million-tonne (mt) refinery is expected to start commercial production by the end of this year.
The project cost has escalated to Rs 37,000 crore because of delays in implementation resulting from law and order problem, environment issues and the Phailin cyclone that struck Odisha in October last year.
The refinery will be able to process the toughest, heaviest and dirtiest crude such as Maya from Mexico, which is cheaper than the cleaner and more easily processed varieties available in West Asia.
IOC is also firming up plans for the second phase of the project involving an investment of Rs 7,650 crore. It is planning to set up a polypropylene unit with a capacity of 0.7mt per annum at a cost of around Rs 3,150 crore. The project is expected to be complete by 2017-18.
The PSU also plans to set up an ethylene derivatives complex at an investment of Rs 4,500 crore and is conducting a feasibility study. The project is expected to come up by 2019-20. The refining capacity of state-owned companies will increase 37 per cent to 185.3mt by 2016-17, following the expansion of units and the commissioning of the Paradip refinery.
At present, PSU refiners own 19 refineries with a total capacity of 135mt. IOC is the market leader, with seven refineries and a capacity of 54.2mt.
The International Energy Agency has projected a widening gap between India’s oil demand and supply. It said the demand reached nearly 3.7 million barrels per day (bpd) in 2013 compared with less than 1 million bpd of total production.
“India’s demand will more than double to 8.2 million bpd by 2040, while domestic production will remain relatively flat at around 1 million bpd,” it said.