HPCL seeks Total, Kuwait investment in new refinery

KUALA LUMPUR, June 10 (Reuters) Hindustan Petroleum Corp. Ltd. is in talks with Total and Kuwait to build a new $3 billion refinery in India instead of expanding the state-run refiner's existing plant, its chairman said on Sunday.

HPCL has been in talks with major Total , Kuwait Petroleum International (KPI) and junior state oil producer Oil India Ltd. over taking a stake in a planned doubling of the expansion at its Vizag refinery for more than six months.

But HPCL Chairman and Managing Director Arun Balakrishnan told Reuters that negotiations had shifted in favour of a new greenfield project, still in Vizag, that would have a capacity of at least 180,000 bpd. He also said the deal could mean building an aromatics petrochemical plant before the refinery.

''We are very sure Oil India will be there plus these two companies, Total and Kuwait Petroleum,'' Balakrishnan said in an interview ahead of the Asia Oil and gas Conference. ''Certainly by the end of the year we should decide one way or the other.'' The refinery is expected to be completed in around 2011.

HPCL is India's third-largest refiner with capacity of about 260,000 barrels per day (bpd).

''This is a very preliminary stage, probably we may start with an aromatic unit and retrofit it with a refinery. A lot of discussions are going on and nothing is final,'' he said.

Balakrishnan said HPCL may still decide to expand its 150,000 bpd Vizag refinery, although the new project and its existing $2 billion plan to upgrade fuel production to meet Euro-4 standards at both its plants would take precedence in the coming years.

India's refiners are seeking foreign partners to help secure crude supplies and fund expansion plans that will turn India into a major fuel exporter within the next five years, but oil majors like BP have been reluctant to invest due to low domestic prices and an uncertain outlook for global margins.

HPCL is also planning to build a new refinery in Bhatinda together with with an investment vehicle run by steel magnate Lakshmi Mittal, after 17 overseas firms turned down the project.

REUTERS SBA VV1139