Indian state-run Hindustan Petroleum Corp (HPCL) plans to invest Rs 30,000 crore (US$6.4 billion) to set up a 15-16 million tonnes-a-year refinery on the west coast.

The new refinery, which may be in the Raigad district of Maharashtra, would compensate for the current space constraints of HPCL's Mumbai refinery.

"We have been shown three pieces of land by Maharashtra government... We should be able to finalize the location in next few weeks," HPCL Chairman and Managing Director Arun Balakrishnan told reporters in New Delhi.

HPCL has obtained a cost estimate for the 15-16 million tonnes refinery, which would cost Rs 30,000 crore, and is currently extrapolating that for a 20 million tonnes-a-year unit.

"We should be able to finalize location and size of the refinery in 3-4 months," Balakrishnan said. "A consultant for doing detailed feasibility report (DFR) will be appointed in one month."

The land offered for the refinery is located between Ratnagiri and Raigad. The unit, called Maharashtra Refinery, would be completed in 48 months from the date of receiving all approvals, he said.

"We face tremendous space constraint at our 6.5 million tonnes-a-year Mumbai refinery. A refinery of this size is spread over 2,000 acres of land but our refinery is spaced in just 350 acres. We feel in 5-10 years, the space constraint will make the unit inefficient," the official said.

Balakrishnan said the Mumbai refinery may eventually be shutdown once the new refinery is built. "That decision we need to take in 6-7 years."

HPCL, which has a 7.5 million tonnes-a-year unit at Vizag in Andhra Pradesh and is also building a 9 million tonnes plant at Bhatinda in Punjab in joint venture with steel czar Lakshmi Mittal, is contemplating a refinery of the size of 15 or 20 million tonnes-a-year.

"We are commissioning a feasibility study which we expect will be completed in six months. Investment decision will be made based on the feasibility study," he said.

"We have sounded Maharashtra government for 2,500-3,000 acres of land for the project," he said.

The project may be funded in a debt-equity ratio of 2:1 or 2.5:1.

The new refinery project comes on the heels of HPCL being forced to put on back-burner a US$10 billion refinery-cum-petrochemical project at Vizag after Mittal and French oil major Total SA pulled out.

The export-only 14 million tonnes-a-year refinery was being planned to target South East Asia and the Middle East. 

Source: Downstream Today