Guru Gobind Singh Refinery, Bhatinda, Punjab, India

The Guru Gobind Singh Refinery (GGSR) in Bhatinda is the latest project to try and boost refined hydrocarbon product capacity in India. With the world price of crude oil going forever upward India would like to be in the position of being able to produce enough refined fuel products for the domestic market and possibly, as in other Asian countries, have enough capacity for export as well.

In August 2007 the Punjab government put the long-delayed Guru Gobind Singh refinery project at Bhatinda back on track by signing a deed of assurance with the main contractor Hindustan Petroleum Corp Ltd (HPCL). The nine-million-tonne refinery has been on the drawing board since 1999 and with the signing of the deed, HPCL has begun the groundwork at the project site.

Petroleum Minister Mani Shankar Iyer ruled out shifting of the project from Punjab to a new site at Rajasthan as Rs3bn ($80m) had already been spent on the project. In addition, the state government has promised financial incentives for the project. The refinery is due to come online in January 2011. The products from the refinery will be moved out in three ways – pipeline (line proposed from Bhatinda to Udhampur), road and rail.

HISTORY OF THE BHATINDA PROJECT

Originally, the refinery was to be set up in joint venture with Aramco of Saudi Arabia and PSIDC each holding 26%. However, Aramco withdrew as it was teaming up with Shell for a separate downstream venture. With the withdrawal of Aramco, the company approached Exxon Corp of the USA. In February 1999, Exxon Corp withdrew from the project as it felt the project was unviable.

There were two other refineries being implemented, RIL's 27mtpa refinery at Jamnagar and Essar Oil's 12mtpa refinery at Vadinar. Petronet India has also planned a 2,290km cross-country pipeline which would cater to the north and central India. Exxon, therefore, believed that there was no market and hence opted out.

Following the withdrawal of Exxon from the project, leading groups like Mobil, Petronas and Birlas were not interested in partnering HPCL in the project. BP was involved in the project until recently having dropped out in June 2006. HPCL now intend to complete the project without any foreign involvement (Mittal Energy has been given clearance to invest).

GURU GOBIND FINANCE

In July 2007 the Guru Gobind Singh Refinery Ltd closed an Rs80bn ($1.93bn) financing deal for the refinery at Bhatinda. The project is sponsored by HPCL (51%) and Mittal Energy Investments (49%). SBI Capital acted as financial adviser and initial lead arranger in the financing, bringing a consortium of 25 banks and the Life Insurance Corporation together.

The lenders comprise Allahahad Bank, Andhra Bank, Bank of Baroda, Bank of Maharashtra, Canara Bank, Central Bank of India, Corporation Bank, Indian Bank, Life Insurance Corporation, Oriental Bank of Commerce, Punjab National Bank, Punjab and Sind Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of India, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra, State Bank of Travancore, Syndicate Bank, The Federal Bank, Union Bank of India, United Bank of India, UCO Bank and Vijaya Bank.

CONSTRUCTION

HPCL acquired the 2,000 acres of land for the refinery project in September 1998 at a cost of Rs660m ($16m). HPCL has so far completed site grading and construction of internal roads along with area lighting and the drinking water system. Foundation for product tanks have been completed and brick pitching job inside the refinery site is in progress.

An 18km-long approach road has been constructed and completed between Bhatinda-Dhabwali road (NH-64) to the refinery site. This was constructed under the supervision of the Punjab PWD at a cost of Rs235m ($6m) on a 50:50 cost sharing basis between GGSR and the Government of Punjab (GOP). A 12km-long water canal has also been laid to the refinery site at a cost of Rs73m ($2.5m).

The PSEB is in the process of installing hardware for providing the required construction power at site. At the refinery site 1,600 acres of operational area is being levelled and graded and roads are being constructed. Tenders are being finalised for providing fire fighting facilities, effluent treatment facilities, product despatch facilities and covering 350 acres of land.

FURTHER DEVELOPMENTS

HPCL has stated that they also plan to set up a petrochemical project at the Bhatinda refinery complex at a cost of Rs5,000bn to Rs6,000bn ($1.2bn). The petrochemical plant could be a naphtha cracker or aromatic complex, which would help add economic value to the refinery. The refinery would produce LPG, naphtha, kerosene and diesel etc. The Punjab government is also looking at the possibility of this leading to further opportunities for downstream petrochemical projects.

To make crude available for the refinery, HPCL has decided to build a 1,011km pipeline from Mundra, Kachchh district, Gujarat, to Bhatinda, running through the states of Gujarat, Rajasthan and Haryana. About 310 acres of land have been acquired for the crude oil terminal at Mundra and site development work for 185 acres have been completed.

HPCL is now seriously scouting for a partner to carry on with the project. ABB Lumus of The Netherlands carried out the detailed feasibility report on the pipeline and the project received CCFI (Cabinet Committee on Foreign Investment) clearance in 2002.

Engineers India Limited (EIL) was then appointed as the project management consultant for the construction of a single point mooring (SPM), crude oil terminal at Mundra (Gujarat coast) and cross country crude oil pipeline.

Competent authorities for acquiring Right of Use (ROU) in the states of Gujarat, Rajasthan and Haryana have been appointed. The design and preparation of various tenders are in an advanced stage.