National oil companies of Oman, Kuwait and Abu Dhabi are in talks to buy up to 24% stake in Madhya Pradesh’s Bina refinery, two people aware of the development said.
Bharat Oman Refineries Ltd (BORL), which operates the refinery, is an equal joint venture between Bharat Petroleum Corp. Ltd (BPCL) of India and Oman Oil Co. S.A.O.C. of the Sultanate of Oman. It has a capacity of 6 million metric tonnes per annum (mmtpa).
“Oman Oil Co., Kuwait National Petroleum Co. and Abu Dhabi National Oil Co. have evinced interest in buying stake in Bina refinery. Oman Oil, which is an existing partner, has expressed interest in making further investments in the refinery. BPCL may be able to raise around Rs2,000 crore from the stake sale,” said a banker, one of the two people cited above, on the condition of anonymity.
BPCL, Oman Oil, Kuwait National Petroleum Co. and Abu Dhabi National Oil Co. did not respond to emails sent on Monday.
“The Indian market is one of the fastest growing which explains the interest from international companies. As for Bina refinery, it is a good functional refinery. There is no gestation period involved which makes it an attractive bet for investors,” said K. Ravichandran, senior vice president and group head, corporate ratings, ICRA Ltd.
BPCL and Oman Oil together hold 50% stake in BORL. In addition, BPCL has subscribed to share warrants of Rs1,585.68 crore in the firm.
“BPCL has made an investment in compulsorily convertible debentures and share warrants of BORL. This investment is equivalent to 24% additional equity stake in BORL. So, technically, BPCL holds 74% stake in BORL. The share warrants would be converted to equity when global companies buy stake in BORL,” the banker added.
In 2015, Oman Oil Co. had expressed its reluctance to put more money in the refinery to fund its Rs3,000 crore expansion. So BPCL, in April 2016, sought government approval to put in more equity to fund the expansion by way of subscription of convertible warrants, giving it the right to convert it into equity shares.
BORL meets BPCL’s product requirements in the northern and central regions in the country and receives crude supply by a cross-country pipeline from Vadinar to Bina. In 2016-17, it recorded a crude throughput of 6.33 million tonnes at an average capacity utilization of 106%. Its gross refining margin for 2016-17 stood at $11.80 per barrel.
“Bina is a well performing refinery posting double-digit gross refining margins. BPCL is planning to expand it further which has got international companies interested,” said the second of the two people cited earlier. He added that Oman Oil, which had earlier declined to participate in the refinery’s expansion, has also expressed interest in pumping in more money.
In 2016-17, BORL reported profit after tax of Rs808.13 crore. According to documents with the registrar of companies, BORL’s net worth is at Rs2,300-odd crore.
Bina refinery is raising its refining capacity in two phases— to 7.8 million tonnes mtpa from current 6 mtpa at a cost of Rs3,072 crore by 2018, and then to 15 mtpa for an additional investment of Rs30,000 crore in the next four-five years. The refinery will also set up a petrochemicals unit with a 1.5 mtpa naphtha cracker.
“BPCL is preparing a detailed feasibility report for the expansion, which would be shared with the companies who have shown interest in the refinery,” the second person added.
According to the oil ministry’s petroleum planning and analysis cell, in January, India recorded a 10.3% increase in oil demand, a fourth straight monthly gain.
Total oil consumption expanded at the fastest pace in 14 months to 16.9 million tonnes from 15.3 million tonnes a year ago.