IOC's nine-million-tonne Paradip refinery recently got the nod from the Public Investment Board. A 26:26 joint venture between IOC and Kuwait Petroleum Corporation, it is scheduled to be commissioned by 2002. HPCL has also planned a nine-million-tonne refinery in Bhatinda, Punjab which will be operational around the same time as the Paradip project. Both the projects will cost around Rs 8,000 crore each. It may be recalled that ONGC's interest in refining has so far been confined to Bharat Petroleum Corporation's six-million-tonne Bina refinery. The Rs 7,500-crore project will be a 26:26 joint venture between BPCL and the Oman Oil Company. ONGC hasmaintained that it will hold a 15 per cent stake in the venture.

Sources also indicated that BPCL plans to hold talks with ONGC on the prospects of becoming a co-promoter for the Uttar Pradesh refinery. This project was planned with Shell but with the latter likely to opt out of the venture, BPCL is keen on teaming up with ONGC in a 26:26 venture.

ONGC has, however, reiterated that it will not accept all these offers and will pick up a stake in only one project. The corporation is also believed to be of the view that such a holding will not exceed 20 per cent. "ONGC has no desire for a 26 per cent stake as the downstream sector is still a new experience," sources said. "As and when its hones its expertise in marketing and refining, it will consider investing in other refineries," they added.

The big question remains - why are these refining companies keen on ONGC participating in their projects? One reason is that a part of the financing will be sewn up with a third partner being roped in. The other, ofcourse, is that the foreign collaborator's presence in some of these projects is still not certain.

For instance, recent reports have suggested that Saudi Aramco is having second thoughts about the Punjab project with HPCL as margins do not appear very attractive. This was the reason why Shell decided not to go ahead with BPCL for the UP project and will instead team up with Aramco for downstream activities in India.

Hence, ONGC seems a logical choice for refineries, but the corporation is categoric that it will not take a stake in more than one project. Observers believe that this will be the Bina refinery as ONGC has been keen on the project for over two years now.

IOC, however, could stand a good chance of roping in ONGC for the Paradip refinery as the two have entered into a memorandum of understanding for sharing expertise in upstream and downstream activities.

ONGC has already expressed its interest in picking up a 20 per cent stake in IOC's 300-mw power project near the Panipat refinery. Itwould be logical to assume that IOC could prevail upon ONGC to participate in the Paradip project. Oil-sector experts believe it is time for refining majors to take the initiative and join hands in downstream projects. According to them, it makes sense for IOC and HPCL/BPCL to jointly execute a refinery. This would not only result in costs being shared but ensure that there is no dearth of expertise in commissioning the project.