HPCL sees Total,Kuwait invest 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, and officials had hoped to clinch a deal in April.

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.

''This would be more of a standalone set-up, not mixed up in the existing refinery,'' Balakrishnan said in an interview ahead of the Asia Oil and Gas Conference. ''Probably we may start with an aromatic unit and retrofit it with a refinery.'' 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).

Government regulations in India make it easier for investors to join new ventures than to buy into existing state projects.

The sector's only major foreign investor is Chevron , which has a stake in a new export-oriented plant being built by privately-owned Reliance Industries Ltd adjacent to its existing 660,000 bpd facility.

''We are very sure Oil India will be there plus these two companies, Total and Kuwait Petroleum. There is room for everyone.

What size stakes will be worked out later,'' he said.

''Certainly by the end of the year we should decide one way or the other.'' The new refinery will run primarily on imported crude, of which a significant part will be from Kuwait, and geared largely to the export market, Balakrishnan said.

''In that part of the country there's a limitation on demand, so a good part of it would be for export,'' he said.

REFINERY UPGRADES 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.

''There are various forecasts...stating that demand in the United States and probably Europe will be a pretty large and there will be a large-scale deficit for the next 5-10 years,'' he said. New Indian and Middle East capacity will fill that gap.

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.

He also said HPCL, which has only recently begun to expand into the upstream, hoped to be producing about a quarter of its estimated 400,000 bpd crude feedstock demand by around 2011. It has stakes in 17 Indian oil exploration blocks.

''Next year NELP 7 (India's licensing process) is coming and probably we'll be a little more aggressive in bidding there.'' REUTERS SBA BD1428