This, as per officials, is being done to strengthen IndianOil's position on the West coast. An agreement to this effect will be signed in the next few months, sources said.

Until now, IndianOil had the entire marketing rights for handling products from Cochin Refineries Limited (CRL). However, with the recent decision of the government on restructuring standalone refineries, CRL is likely to go to Bharat Petroleum Corporation Limited (BPCL). The move to set up a product terminal at Dabhol will help IOC in retaining its customers in the western region, sources said."We may either completely buy out the liquid fuel facilities created by Enron or may even enter into a joint venture arrangement with it for sharing these facilities. Talks are on with Enron over this," a senior IOC official said. Enron, which is currently running its power project on naphtha and high speed diesel (HSD), will soon shift to LNG for running its 740 mw Phase I and 1404 mw Phase II power projects at Dabhol.

It is significant to note that all other competitors of IOC, both in public and private sector including Bharat Petroleum, Hindustan Petroleum and Reliance have a strong presence on the western coast.

Both HPCL and BPCL have refineries in Mumbai. HPCL is coming with another in Mangalore, with the Birlas, and after BPCL gets Cochin, its position will be further strengthened on the West Coast. Reliance, on the other hand, has Asia's biggest refinery at Jamnagar."With Cochin Refineries likely to go to Bharat Petroleum,IOC needs to build additional facilities for serving its customers in the western region," officials said. Following the setting up of a product terminal at Dabhol, IOC would construct liquid fuel pipelines starting from the shore terminals at Dabhol. These pipelines would preferably be located along the MetGas pipeline Right of Way (ROW) as well as on independent routes towards the north, south, east as well as other tap-off points. MetGas Pipeline is the $ 1 billion LNG pipeline venture of Enron, where IOC is likely to pick up a 26 per cent equity stake.

In return, IOC would give Enron the status of a `Most Preferred Customer' in meeting the latter's requirements for liquid fuels such as motor spirit, HSD and naphtha. The petroleum products supplied by IOC will be used by Enron to operate its power plants, generators and other necessary equipment at Dabhol. IOC will sell petrol, kerosene, diesel and naptha to Enron at competitive rates.

IOC had recently entered into a Memorandum of Understanding (MoU) with Enron for collaborating in the energy and communications business. Under this MoU, IOC had agreed to directly market 1.5 million tonnes of LNG from the Dabhol LNG terminal of Enron.