``BPCL and Essar are yet to come to an agreement on the acquisition price,'' institutional sources said. Essar Oil was in talks with BPCL and Oman Oil Company to rope them in as strategic partners in the refinery. BPCL, which is considering a stake in Essar Oil, has made it clear that it is not interested in acquiring the company's upstream operations. This is being perceived by observers as being the major reason for demerging the business and forming a separate entity.

Oman Oil has similarly indicated that if it were to pick up a 26 per cent stake in Essar Oil, it would prefer an equity arrangement forthe terminals and tankages of Essar Shipping. Oman Oil would also pitch in as the supplier of crude to the 10.5 million tonne refinery, which is being commissioned in 2001.

A three-way equity participation in Essar Oil is a distinct possibility which would involve BPCL, Oman Oil and the Ruias who presently hold over 50 per cent in the company. If this were to happen, there would be little logic in commissioning the six million tonne Bina refinery planned to be set up over three years ago by BPCL and Oman Oil. The project has now run into several environmental hurdles and observers say that with mounting costs, it would no longer be viable.

The company which eventually takes a stake in Essar Oil, be it BPCL or Oman Oil, would also be a stakeholder in the Rs 400 crore Vadinar-Kandla pipeline being commissioned towards the end of this year. Essar Oil, along with Reliance Petroleum, holds 13 per cent equity in the project, where Petronet India and the Indian Oil Corporation account for 26 per cent each. Thepipeline will transport the products from the refineries of Essar and Reliance from Vadinar to Kandla from where they will be carried in IOC's Kandla-Bhatinda pipeline.

Similarly, the new stakeholder in Essar Oil will also have a presence in the Rs 4,400 crore Central India pipeline. Essar Oil is yet to pay up the amount due for its ten per cent stake in Petronet India, the joint venture pipelines company formed in May 1997. Top sources said that the deadline of May 31 had long lapsed and there was no indication when the money (roughly Rs 10 crore) would be received.

Essar Oil is considering a demerger of its exploration & production (E&P) business as part of a major restructuring drive. Pricewaterhouse Coopers is working on the feasibility plan which will involve equity participation by an oil company from either here or abroad.