IOC eyes stake in Nagarjuna’s Cuddalolre refinery

More than a decade after it declined to take a stake in the Nagarjuna Group's refinery in Tamil Nadu, state-owned Indian Oil Corp (IOC) is looking at buying an equity stake in Nagarjuna's six million tonnes a year Cuddalore refinery.

Sources told PTI that IOC has held preliminary discussions on a possible equity stake in the project. The move follows talks by Singapore-based Netoil to buy a stake in Nagarjuna Oil Corp Ltd (NOCL) broke off in February this year.

Nagarjuna Oil Refinery Ltd (NORL) holds 46.78 per cent of the equity of NOCL. The Tatas too are a shareholder in the refinery.

Sources said IOC had in 2002 declined to take a majority stake in the project on the grounds that the country has surplus refining capacity.

Also, it had reasoned that the IOC subsidiary Chennai refinery was being expanded and a new 15 million tons a year refinery being set up at Paradip in Odisha to cater for the fuel demand in the southern and eastern India.

Chennai refinery has since been expanded to 10.5 million tons and the Paradip refinery commissioned recently. IOC has now begun discussing the equity participation in the project again, they said.

Nagarjuna Oil Refinery had in September last year stated that a confirmatory due diligence of NOCL was being undertaken by Netoil to acquire the project for Rs3,600 crore.

The six million ton refinery is the first phase of a Rs25,000 crore project that will have an ultimate capacity of 12 million tons.

The project was delayed due to damages caused by a cyclone some years back as well as funding problems due to a global economic slowdown later.

Around 15 lenders have invested in the project and they have reportedly sought the Reserve Bank of India's dispensation in view of the assets likely to be classified by RBI as non-performing.

The project originally involved relocation of an existing refinery of Mobil, Germany with total refurbishing, revamp, upgrading and modernisation, coupled with addition of several new plants and equipments including captive power plant and captive port terminal.

The health check and residual life assessment have been done by RWTUV, Germany and Engineers India Ltd who have certified the residual life of the refinery as more than 20 years, sources said.

The project is being implemented by ABB Lummus, who has provided guarantees for completion and performance. Crude supply and export product offtake are provided by Caltex. Domestic product off-take, operation and maintenance, training and other technical advisory services are being sought from IOC, they said.