MUMBAI: The Adani Group and Indian Oil Corporation are in talks to build a Rs 30,000-crore joint venture refinery at Mundra, which would give Gautam Adani an entry into the oil sector while the state-run company would get land port facilities for the proposed export-focused unit.
The proposed 30-million-tonne refinery at Mundra will make Prime Minister Narendra Modi's native state, Gujarat, a bigger energy hub. It already has refineries of Reliance Industries, Essar Oil and Indian Oil, apart from two LNG terminals and the country's biggest city-gas distribution network.
Industry sources said Gautam Adani has held initial talks with top executives at IOC and offered around 3,500-4,000 acres of land for the project. In exchange, Adani is keen to get a minority stake in the project that may be equivalent to the price of the land, sources said.
A spokesman from IOC said: "We would not like to comment on this at this moment", while the Adani Group did not respond to ET's query. If the deal works out, it will provide IOC land with port facility adjacent to it on the western coast of India.
Most of the refineries of IOC are landlocked and it is keen to set up an export-oriented refinery on the western cost. The deal will also mark the entry of Adani Group in crude oil refining business. The two companies currently have a joint venture for city gas distribution.
"IOC is keen to start a project on the western coast and Adani's Mundra land is well suited for it. The two companies have an old relationship and Mr Adani wants to build on it and become a partner in the refinery project too," a source aware of the development said.
Another source said Adani would get only a minority stake as its expertise is not in the refining business. "Though IOC has been considering Mundra for the project for almost a year, it is only now that the Adanis have proposed the JV. It is still very early to say how much stake the Adani Group may have in the JV but it would be strategic partnership for both."
OC has 10 refineries with a combined capacity of 65.7 million tonne per annum year, which accounts for 31 per cent of India's domestic refining capacity. The company aims to increase its refining capacity to 100 mtpa by 2021-22.
Its 15 mtpa refinery project at Paradip in Orissa, which has been set up at a cost of.`32,710 crore, is nearing completion and the company is keen to start on its next project on the western cost.
Two people privy to development said IOC's advisers had short-listed three locations on the western Cost — Ratnagiri, Kandla and Mundra. Mundra has emerged as the favourite as Ratnagiri would require heavy investment on supporting infrastructure while land acquisition and port facilities were a challenge in Kandla.
Mundra appears to be attractive as majority of the land needed for the project is already available with the Adanis and their Mundra
SEZ has recently been given clearance by environment ministry. India is a net exporter of petroleum product. Its current local demand is 160 mtpa while the country has a refining capacity of 215 mtpa and another 90 mtpa is under construction.
"There is massive refining capacity addition happening in Middle East, China and rest of Asia in near future. In fact 80 per cent of the global capacity addition (2014-20) is coming up in Asia. Any greenfield capacity addition programme in India needs to be carefully evaluated — else there would be glut of capacity and low margin like Europe," said Debasish Mishra, senior director — consulting at Deloitte Touche Tohmatsu India.
Source : economictimes.indiatimes.com