IOC has, in any case, decided to go it alone for the project and the board has already approved an initial investment of Rs 750 crore. The east coast refinery was originally cleared by cabinet more than five years ago as one of three joint sector refineries. The other two were the central India refinery (Bharat Petroleum Corporation with Oman Oil Company) and the now shelved west coast project, a 26:26 venture of Hindustan Petroleum Corporation and Oman Oil.

KPC has, however, indicated that it is keen on being a long-term supplier of crude to IOC. The company has also expressed itsinterest in participation in other petro-related areas like exploration & production, petrochemicals etc with IOC as partner.

The move to go in for a long-term crude supply arrangement makes sense what with complete deregulation of the oil sector due to happen three years down the line. By that time, there will be substantial refining capacity addition which will call for more crude imports.

KPC is incidentally in talks with Mangalore Refinery and Petrochemicals to take a 26 per cent stake in the project and step in as a strategic ally. This could explain why the company has opted out of the Paradip refinery as it makes more sense to invest in an existing project rather than a greenfield facility.

IOC had offered KPC the right to market the products of the refinery wholly or partially through a new joint venture company but even this did not help expedite matters. The offer was made keeping in mind that all multinational oil companies are keen on getting a foothold in marketing first before investing inrefineries. This explains why Shell and Saudi Aramco had conceived of a proposal to start a marketing venture where an oil PSU would transfer its retail outlets to the new company.

At one point, KPC was exploring the option of roping in a strategic partner to jointly infuse Rs 866 crore as equity in the east cost refinery. IOC had then reiterated that it would have the right to exercise a similar option which would have translated into an offer to ONGC. The two navratnas, it may be recalled, have entered into a strategic alliance to work together in the upstream and downstream sector.

The Paradip refinery will have a product pipeline linking the coastal location to Ranchi via Rourkela. The equity pattern envisaged Petronet India, IOC and the joint venture of KPC and IOC taking 26 per cent each in the project while the balance would have been offered to strategic/financial investors.