IOC hopes to get Iranian investment for CPCL refinery

Iran has shown interest in investing in the Rs 30,000-crore expansion project of Chennai Refinery even though the gulf nation faces a complete squeeze of its oil supplies to India following US sanctions. The investment would, however, be contingent upon availability of banking channels post-November, when the US imposed restrictions come into full force.

“They (Iran) are open to investment in the refinery project but whether these channels (for investment) will be available post-sanctions is something we don't know," IOC chairman Sanjiv Singh said.

IOC plans to pull down the 1 million tonnes per year Nagapattinam refinery of its subsidiary, Chennai Petroleum Corp (CPCL) and build a brand new 9 million tonnes per annum (mtpa) unit in next 5-6 years.

The National Iranian Oil Co (NIOC), which holds 15.4 per cent stake in CPCL, is keen to participate in the expansion project. But this have to be weighed in context of US imposed restrictions. US sanctions will come into effect from November 4 and will block payment channels and even paying in US dollar or Euros for crude oil that India imports from the Persian Gulf nation may not be possible. Indian Oil Corporation (IOC) holds 51.89 per cent stake in CPCL.

Singh said that the CPCL’s expansion was to originally cost Rs 27,460 crore but is now estimated to cost anything between Rs 25,000 crore and Rs 30,000 crore. This would mean an investment from existing partner would be required. CPCL, formerly known as Madras Refineries, was formed as a joint venture in 1965 between the government of India, Amoco and NIOC having a shareholding in the ratio of 74 per cent, 13 per cent and 13 per cent, respectively. In 1985, Amoco disinvested, following which, the government held 84.62 per cent and NIOC 15.38 per cent.

The government later disinvested 16.92 per cent of the paid-up capital. The company was listed in 1994. IOC acquired the government stake in 2000-01 and holds 51.89 per cent stake in CPCL while NIOC has 15.40 per cent.

 Asked about US sanctions against Iran impacting oil supplies, Singh said the company has "adequate alternate supplies" ready to meet any shortfall that may arise from Iran.

IOC has booked for offtake of Iranian oil for even September to prevent restriction in banking channels later from impacting imports. Singh also said that IOC would also invest Rs 20,000 crore in city gas distribution projects in next 5-8 years. This strategy would help the company to complement its traditional oil refining and marketing business.

The firm, which owns a third of India's oil refining capacity and has 44 per cent market share of fuel business, sees compressed natural gas (CNG) replacing a some of the petrol and diesel consumed in vehicles today and LPG getting replaced by piped cooking gas in households. It wants to be in these businesses to keep its market leadership position.

IOC, which among all PSUs bid most aggressively in the latest city gas distribution (CGD) licences, is hoping to net licences to retail CNG to automobiles and piped natural gas to households and industries in about 20 cities, Singh told reporters.