Date:24/08/2005 URL: http://www.thehindubusinessline.com/2005/08/24/stories/2005082402790200.htm

Back High crude prices derail IndianOil Petronas' plan to set up LPG terminal

Pratim Ranjan Bose

Kolkata , Aug 23

THE spiralling of crude prices, leading to high refining margins, and the resultant surge in proposals to set up refineries has thrown a spanner into the works of IndianOil Petronas Pvt Ltd's (IPPL) plan to put up a Rs 250-crore LPG terminal in Chennai. The viability of the project was heavily dependent on the import plans of IOC and other PSU oil marketing companies.

Headquartered in Kolkata, IPPL currently has terminal facilities only at Haldia port. The company is a joint venture between IndianOil and Petronas of Malaysia.

Sources said that the recent revival of Nagarjuna Oil Corporation's (NOCL) long-pending proposal to put up a six-million-tonne refinery at Cuddalore, and HPCL's decision to set up a second refinery at Vizag, may result in substantial changes in the projected demand-supply scenario of LPG in the South.

MRPL has already undertaken an expansion project from 12 million tonnes to 15 million tonnes.

In view of all this, IndianOil has sought more time to provide any business assurance to the proposed IPPL terminal in Chennai.

Apart from doubling the capacity of its of its existing 7.5-million-tonne refinery at Vizag, HPCL has also recently proposed setting up a 15-million-tonne greenfield refinery-cum-petrochemicals complex at Vizag through the joint venture route.

This is in addition to the ongoing de-bottlenecking work going on at the existing refinery with the objective of increasing the capacity to 8.9 million tonnes. The de-bottlenecking is scheduled to be over by August 2006.

NOCL's proposal, on the other hand, is reportedly moving fast. While company officials were not available for comment, sources said that the financial closure of the project could be declared in next two months.

The NOCL project is expected to substantially affect the existing LPG economy in the fast-growing Tamil Nadu market. While domestic supplies fall short of the demand, imports have proved to be costlier as they are made through ports at Mangalore, Kandla, and Vizag.