Tata makes big entry in Barmer refinery project

Vol 23, PW 3 (28 Nov 19) Midstream & Downstream

Tata Projects has achieved its goal of breaking into the lucrative refinery construction business with three straight wins in tenders to set up Hindustan Petroleum's 9m t/y Barmer refinery and 2m t/y petrochemicals facility.

HPCL and project consultant Engineers India opened price bids on November 22 for the 3.5m t/y Vacuum Gas Oil-Hydrotreater Refinery Off Gas unit or EPCC-10. Unexpectedly, Tata bid lowest for CAPEX at Rs1315.50cr ($187m) followed closely by TechnipFMC at Rs1330.17cr ($190m) while Petrofac lagged behind at Rs1627cr ($232m).

Petrofac's participation ends uncertainty over whether it would be disqualified after one of its executives pleaded guilty to bribery charges in the UK. Tata also bid lowest for EPCC-4 or the 2.4m t/y Delayed Coker Unit and Unsaturated LPG Treating Unit for which HPCL opened price bids on November 21, quoting Rs2270cr ($324m) followed by Petrofac at Rs2318cr ($331m) and finally L&T at Rs2841cr ($405m) for CAPEX.

In EPCC-4, Petrofac’s OPEX numbers were not considered by HPCL because it made a major error quoting the value of proposed steam consumption in kg/hr instead of in tonnes/hour. Tata also bid lowest when HPCL opened price bids on November 20 for the EPCC-1 package to set up a 9m t/y Crude Distillation Unit and a 4.8m t/y Vacuum Distillation Unit.

Tata quoted Rs1746.90cr ($249m) while Toyo Engineering was close behind with Rs1794cr ($256m) followed by L&T at Rs2049cr ($292m) and Petrofac with Rs2173cr ($310m).

Industry sources say these are CAPEX figures for EPCC-1 and when OPEX is also considered for utilities such as steam and electricity Tata is ahead of Toyo but by a razor thin margin of just Rs10cr ($1.4m). Many feel the narrow price differences between the lowest and next ranked bidders in these tenders indicates that Tata’s pricing strategy was just right. "But can Tata execute these projects on time?" asks a source. "It totally lacks any previous engineering experience in the core refinery process units EPC business.” Tata sources dismiss concerns and say they have tied up with Aker, Fluor and Foster Wheeler to provide engineering support in EPCC-1, EPCC-4 and EPCC-10. “The key is to successfully integrate engineering with project execution,” says Tata. “We have been successfully executing mega projects in steel, urban infrastructure and other sectors so we have very rich project execution experience.” Sources say HPCL will now call Tata for “at least one round of negotiations” to try and further reduce its prices before issuing LoAs.

Tata makes big entry in Barmer refinery project

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