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AUG 07 2014

Adani in talks withIndian Oil for Rs 30,000 crore Mundra refinery JV

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 07th AUG 2014

The Adani Group and Indian OilBSE-2.02 % Corporation are in talks to build a Rs 30,000-crore joint venturerefinery at Mundra, which would give Gautam Adani an entry into the oil sectorwhile the state-run company would get land port facilities for the proposedexport-focused unit.

The proposed 30-million-tonnerefinery at Mundra will make Prime Minister Narendra Modi's native state,Gujarat, a bigger energy hub. It already has refineries of RelianceIndustries , Essar Oil and Indian Oil, apart from two LNG terminalsand the country's biggest city-gas distribution network.

Industry sources said GautamAdani has held initial talks with top executives at IOC and offeredaround 3,500-4,000 acres of land for the project. In exchange, Adani is keen toget a minority stake in the project that may be equivalent to the price of theland, sources said.

A spokesman from IOC said:"We would not like to comment on this at this moment", while theAdani Group did not respond to ET's query. If the deal works out, it willprovide IOC land with port facility adjacent to it on the western coast ofIndia.

Most of the refineries of IOC arelandlocked and it is keen to set up an export-oriented refinery on the westerncost. The deal will also mark the entry of Adani Group in crude oil refiningbusiness. The two companies currently have a joint venture for city gasdistribution.

"IOC is keen to start aproject on the western coast and Adani's Mundra land is well suited for it. Thetwo companies have an old relationship and Mr Adani wants to build on it andbecome a partner in the refinery project too," a source aware of thedevelopment said.

Another source said Adani wouldget only a minority stake as its expertise is not in the refining business."Though IOC has been considering Mundra for the project for almost a year,it is only now that the Adanis have proposed the JV. It is still very early tosay how much stake the Adani Group may have in the JV but it would be strategicpartnership for both."

IOC has 10 refineries with acombined capacity of 65.7 million tonne per annum year, which accounts for 31per cent of India's domestic refining capacity. The company aims to increaseits refining capacity to 100 mtpa by 2021-22.

Its 15 mtpa refinery project atParadip in Orissa, which has been set up at a cost of.`32,710 crore, is nearingcompletion and the company is keen to start on its next project on the westerncost.

Two people privy to developmentsaid IOC's advisers had short-listed three locations on the western Cost –Ratnagiri, Kandla and Mundra. Mundra has emerged as the favourite as Ratnagiriwould require heavy investment on supporting infrastructure while landacquisition and port facilities were a challenge in Kandla.

Mundra appears to be attractiveas majority of the land needed for the project is already available with theAdanis and their Mundra SEZ has recently been given clearance by environmentministry. India is a net exporter of petroleum product. Its current localdemand is 160 mtpa while the country has a refining capacity of 215 mtpa andanother 90 mtpa is under construction.

"There is massive refiningcapacity addition happening in Middle East, China and rest of Asia in nearfuture. In fact 80 per cent of the global capacity addition (2014-20) is comingup in Asia. Any greenfield capacity addition programme in India needs to becarefully evaluated – else there would be glut of capacity and low margin likeEurope," said Debasish Mishra, senior director – consulting at DeloitteTouche Tohmatsu India.


Gujarat Essar Electric Power Development Corporation Limited Oil China Asia Orissa Indus Liquefied natural gas Essar Essar Steel Essar Oil Ltd. Europe Deloitte Adani Group India

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