ICICI, HDFC to pick up 50% in Hindustan Petroleum upstream plan
Madhumita Chakraborty
NEW DELHI, January 4: Hindustan Petroleum Corporation Ltd (HPCL) has signed memoranda of understanding (MOU) with ICICI, the Housing Development and Finance Corporation (HDFC) and some other financial institutions for its diversification upstream.The financial institutions will pick up a 50 per cent stake in HPCL's exploration and production venture. The Rs 18,000-crore turnover petroleum refining and marketing company will hold the remaining 50 per cent stake in the Rs 20 crore equity of its exploration and production (E&P) joint venture. The joint venture is expected to have an initial investment outlay of roughly Rs 3,000 crore. The company top brass say that HPCL will restrict its upstream activities to discovered fields in the beginning and only venture into high-risk areas like exploration at a later date. According to HPCL's annual report for last year, the company planned to be the main promoter in the E&P joint venture "with matching (equity) participation from its joint venture partners." The
joint venture partners, the report says, would initially be financial institutions and "the balance equity would eventually be raised from other interested E&P companies and the public." That investment plan seems to have undergone subtle changes since, for E&P companies (like the Oil and Natural Gas Corporation at home and multinationals Shell International or Mobil) do not as yet figure among HPCL's list of partners. "We may have some technical collaboration with someone," said HPCL's director, finance, SD Gupta, when asked if the company was thinking of a tie-up with other E&P companies as well. The two other mega oil refining and marketing companies at home, Indian Oil Corporation and Bharat Petroleum Corporation Ltd (BPCL), are also diversifying upstream and are known to be scouting for partners among the E&P companies. IOC already has a working relationship with ONGC Videsh that is intended to help both the companies synergise in upstream and downstream activities. Hindustan Petroleum seems to
have picked on money-lenders rather than technology vendors at this stage, because it plans to begin small in its diversification upstream. The company will only bid for discovered fields on offer, no doubt to ensure a captive and steady supply of crude for its two refineries at Visakhapatnam and Bombay, that have a combined capacity of 11 million tonnes. The Visakhapatnam refinery is already in the process of expanding its throughput capacity to 7.5 million tonnes from 4.5 million tonnes. Joint ventures with the Saudi Arabian Aramco for the Bhatinda refinery and with another partner (yet to be finalised) for the west coast refinery will give Hindustan Petroleum access to another 12 million tonnes of refining capacity.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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