ONGC firms up Rajasthan refinery plans as state promises fiscal sops

NEW DELHI: A consortium led by the state-owned Oil & Natural gas Corporation could invest about Rs 12,000 crore to built a six million tonne refinery in Rajasthan, as the Congress government in the state is willing to provide adequate fiscal incentives to the refinery.

The refinery will initially process crude from the Cairn India-operated Barmer oil field in the state, which is at presented processed outside the state by various refineries.

Cairn India and ONGC are 70:30 partners in the field. ?The project could be announced after its feasibility is finalised,? a senior official in the government said, adding that the Rajasthan government was ready to provide adequate benefits and the Centre is more than willing.

The development was also confirmed by oil minister Murli Deora in the Rajya Sabha. ?ONGC is in consultation with the government of Rajasthan on feasibility of setting up a refinery at Barmer,? he said.

The previous BJP government in the state had refused to give concessions to ONGC for setting up the refinery as sops sought were more than double the project cost. After the BJP-led government in Rajasthan was replaced by the Congress regime, the project has gathered some urgency.

Rajasthan government had even appointed a committee to explore the idea after Cairn and its 30% partner in the Barmer oil field Oil & Natural Gas Corp (ONGC) had shelved their plan to construct a well-head refinery.

The former oil secretary headed SC Tripathi committee had certified feasibility of a small well-head refinery at the Barmer oil field. It had suggested to initially set-up a 4.5 to 6 million tonne refinery and later expand it to 9-12 MT.

This is endorsed by the technical experts as well. ?Preliminary studies suggests that a 6 million tonne refinery is feasible with adequate state concessions. But final decision will be taken the feasibility report,? a technical expert working on the project said.

The feasibility report, expected in the next two months, will provide details of the fiscal incentives that could make the project viable.

The incentives could include sales tax exemption and land grant, he added.

State-owned Engineers India Ltd (EIL) is preparing the feasibility report.

?There will not be any dearth of investors after its feasibility is established. ONGC will play a lead role. Even EIL may pick up a 5% stake,? an official in the oil ministry said.

The Rajasthan government has already committed to become 26% partner in the refinery project.

As per the ministry officials, besides state-owned refiners such as IOC, BPCL and HPCL, Barmer crude oil producer Cairn India could also invest in the project.

ONGC did not respond to ET?s email query. Cairn India spokesman said, ?We offer no comments on this.?

ONGC had always maintained that the refinery project was the first option but project was not viable without concessions worth over Rs 26,000 crore.

Source: The Economic Times, Delhi, Wednesday, 11th August 2010
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