Exxon pulls out of HPCL refinery project

Reliance Petroleum Ltd is setting up a 27 million tonne per year refinery at Jamnagar in the western state of Gujarat, while Essar Oil Ltd says it is building a 24 million tonne refinery at Vadinar near Jamnagar. Both refineries are scheduled to start production in the second half of 1999.

Pipeline firm Petronet India Ltd plans to set up a 2,290 km (1,430-mile) cross-country pipeline to transport diesel, kerosene, naphtha and motor spirit from Reliance’s and Essar Oil’s refineries, plus an Indian Oil Corp refinery, to run across five major product consuming states.

The sources said thatExxon does not believe there is a market for another refinery given the rival projects. Petronet’s pipeline project will service north and central India. In addition, there is already an existing 1,400 km (875 mile) 7.2 million tonne-per-year product pipeline from Kandla Port to Bhatinda, which is being expanded to about 11.6 million tonnes capacity.

Exxon’s decision to pull out of the venture was conveyed to the Petroleum Ministry by David Busby, president of Esso Petroleum Ltd, on February 16, the official said.

When contacted on telephone, Busby declined to comment. Esso Petroleum is an Indian subsidiary of US Exxon Corp. The official said Exxon and HPCL had signed a memorandum of understanding to develop a nine-million-tonne refinery at Bhatinda in the northern state of Punjab.

Exxon had shown interest in taking 26 per cent equity in the project, he added. Exxon’s pullout would be the second withdrawal by a foreign investor from participating in the Bhatinda project. The first partner Saudi Aramcopulled out after it tied up with Royal Dutch Shell group to set up downstream projects.