Bharat Petroleum plans to launch IPO for Bina refinery by next year

Bharat Petroleum Corp Ltd is planning to launch an initial public offer (IPO) of its Bina refinery unit next year, chairman of the state-owned firm S Varadarajan said on Thursday.

India's second-biggest state refiner, BPCL will hold 50% in Bharat Oman Refineries Ltd (BORL), which had built the unit, while Oman Oil Company will hold the remaining 26%. The IPO "is planned for next year," Varadarajan told reporters.

BPCL is pressing ahead with investing $4 billion in expanding Bina refinery capacity.

The capacity of Bina refinery in Madhya Pradesh is planned to be raised to 15 million tonne in two phases - to 7.8 million tonne a year from current 6 million tonne at a cost of Rs 3,500 crore by 2018, and then to 15 million tonne at an additional investment of Rs 18,000-20,000 crore in five to six years, he said.

OCC is willing to participate in the first phase expansion but not in the second phase, said another official.

In 2009, it paid 50% premium for a re-entry into the Rs 11,397-crore Bina refinery project. The project was originally conceived through a joint venture company, BORL but the OCC did not contribute equity beyond the initial Rs 75 crore.

The Omanese oil major came back to pick up 26% stake in the project for an additional Rs 1,220 crore.

The BORL was formed as an equal joint venture company way back in 1993. However, following inordinate delays in the implementation of the project, OOC froze its investment in the company at Rs 75 crore for a two percent equity stake.

BPCL provided the unbridged portion of the Rs 4,000-crore equity in form of loan. The state-run firm got its loan back once OOC made payments for its 26% share. The remaining 25% is with financial institutions.

BPCL also operates a 12 million tonne a year refinery at Mumbai and 9.5 million tonne Kochi unit. It also has majority stakes in the 3 million tonne Numaligarh refinery in Assam.

The official said BPCL is expanding and upgrading its Kochi refinery in Kerala to process high sulphur crudes by 2016. Kochi refinery capacity is being raised to 15.5 million tonne from current 9.5 million tonne.

Crude grades with a high sulphur content are cheaper, and refineries that have installed speciality secondary units to process them can lower feed costs and increase their margins.

Besides boosting margins with the upgrade and expansion, the refinery will also be able to produce fully Euro IV compatible petrol and diesel.

Also, Numaligarh refinery capacity is being planned to be raised to 9 million tonne. The expansion, however, is still at the drawing-board stage and it would hinge on tax concessions and other benefits from the central and state governments, he said.