Vol 3, PW 6 (14 Apr 99) Midstream & Downstream

Just when you thought it was dead and dusted, it has reappeared in another guise.

Shell and Saudi Aramco are back in India with a mega-refinery project, this time involving Hindustan Petroleum Corporation (HPCL), the countrys second largest refiner. The file, sitting before Devi Dayal, Additional Secretary in the oil ministry, has caused quite a stir.

On 24 February, a meeting was held in the oil ministry, chaired by TS Vijayaraghavan, Secretary, to discuss the proposal (sent in six months ago) by Saudi Aramco and Shell to set up a joint venture company with HPCL, where the Indian refiner holds 50%, and the balance 50% is divided equally between Saudi Aramco and Shell. The proposal calls on HPCL to transfer its refining assets and retail outlets to the joint venture, while Shell and Saudi Aramco would bring in cash.

Also attending the meeting was Devi Dayal, and representatives from Indian Oil, Bharat Oil, Indo-Burmah Petroleum, HPCL, and the Oil Coordination Committee. The debate was fiery, with Devi Dayal opposing the proposal as a back-door entry for MNCs into the Indian oil sector without much investment.

His boss Vijayaraghavan, however, supported the proposal, arguing that excess refining capacity in India required economies of scale. At this meeting, IOC and BPCL opposed the proposal, though BPCL would in coming days reverse its opposition.

HPCL and IBP argued strongly in favour of the proposal. HPCL cited the emerging alliance between IOC and ONGC as justification for approving its aliance with Shell and Saudi Aramco.