Oman Oil not to raise stake in BPCL’s Bina refinery

MUMBAI: Oman Oil Company will not increase its stake in the Bharat Oman Refineries Ltd (BORL), a joint venture between state-run Bharat Petroleum Corporation Ltd (BPCL) and the Oman company, according to two officials from BORL.

“Oman has not shown interest and thus we converted our warrants into shares. This has increased our stake in BPCL from 50% to 63%. BORL is now a subsidiary of BPCL,” said N Vijayagopal, director finance, BPCL.

BPCL had made an investment in compulsorily convertible debentures and share warrants of BORL or Bina refinery in Madhya Pradesh. This was equivalent to 24% additional equity stake in BORL. Part of these share warrants, 13%, have been converted to equity. A decision on conversion of the remaining warrants would be taken at a later stage, the company said.

In 2015, Oman Oil Co. had expressed its reluctance to put more money in the refinery to fund its ₹3,000 crore expansion. BPCL, in April 2016, sought government approval to put in more equity to fund the expansion by way of subscription of convertible warrants, giving it the right to convert it into equity shares.

Till a year back, in addition to Oman Oil, national oil companies of Kuwait and Abu Dhabi were also in talks with BPCL to buy up to 24% stake in the refinery.

BORL is a key refinery for BPCL as it helps the company serve the northern and central regions in the country and receives crude supply by a cross-country pipeline from Vadinar to Bina.

Bina refinery has raised its refining capacity in two phases— to 7.8 million tonnes mtpa from the initial 6 mtpa at a cost of ₹3,072 crore and then to 15 mtpa for an additional investment of ₹30,000 crore in the next four-five years. The refinery will also set up a petrochemicals unit with a 1.5 mtpa naphtha cracker.

“Bina is a well performing refinery posting handsome gross refining margins and our expansion plans are on track,” added Vijayagopal. BPCL has cut its capital expenditure for this fiscal by 36% from ₹12500 crore to ₹8000 crore.

The company has categorised its projects into minor and major projects. “Any project which has an investment of less than ₹150 crore is minor project and put on hold,” added Vijayagopal.

BPCL, he said, has taken this conscious decision as the board does not want to burden the company in current difficult times with a huge capex impacting borrowing and debt equity ratio. “It will however not have any major impact on our company’s future,” he added.