OREANDA-NEWS. May 27, 2011. State-run refiner Hindustan Petroleum Corp has revived plans to build in a consortium a USD 10 billion refinery-cum-petrochemical project in southern India, its chairman said on Thursday. S. Roy Choudhury told reporters the company was already in talks with Indian firms Oil India and GAIL(India) and would also approach foreign companies, including Total for the project to come up in Vizag city.

An HPCL-led consortium, which included Mittal Group, Total of France, and Oil India and GAIL, had put the project on hold in 2007 when petrochemical demand was seen as too weak to justify the investment. "We are doing the detailed feasibility study for the project," he said.

Roy Choudhury also said his firm had decided to merge its exploration subsidiary Prize Petroleum with itself by buying shares of other partners - ICICI and HDFC groups - which are not willing to invest as exploration is not their business.

CRUDE INTAKE  HPCL, which runs a 130,000 barrels per day (bpd) refinery in Mumbai and a 166,000 bpd facility at Vizag, plans to raise intake of heavy crude to 70 percent of total oil needs, its head of refineries K. Murali said. "Normally we process heavy and light in 60:40 ratio but now we are doing 70:30 as the differential between Dubai and Brent crude has widened," Murali said.

Brent-Dubai price spread is an approximation of the premium at which Atlantic basin light-sweet crude trades to Gulf heavy-sour grades. Front-month Brent/Dubai Exchange of Futures for Swaps for July rose to USD 6.25 a barrel, up 42 cents from Wednesday.

He said HPCL was looking at diversifying its crude slate to include new grades from Brunei, Azerbaijan, Angola and Malaysia.  Murali said despite a surge in sale of diesel, as it is priced cheaper than petrol, his firm would not tweak the crude slate to accommodate grades that yield higher diesel. He also said HPCL has no plans to import gasoline in the current fiscal. There could be marginal diesel imports.

REVENUE LOSSES  HPCL's head of finance B Mukherjee said current desired increase in local price of petrol is 4.50 rupee/litre and this could narrow to 1 rupee/litre from June 1 as Indian prices are linked to fortnightly average of Singapore spot price on free on board basis.

India gave autonomy to oil firms to fix petrol prices in June but has kept control on prices of diesel, cooking gas and kerosene. A ministerial panel is expected to meet on June 9 to discuss raising prices of subsidised fuels.

Mukherjee said HPCL is currently losing 1.06 billion Indian rupees (USD 23.4 million) a day on sale of subsidised fuels - diesel, cooking gas and kerosene, leading to short term borrowings for working capital needs.

HPCL's current gross borrowing stands at about 270 billion rupees and the firm favours raising foreign debt which are cheaper than rupee loans. Mukherjee said HPCL aims to spend 450 billion rupees in six years from April 2011 for expanding its refining capacity.