The board of Indian Oil Corporation (IOC) has approved the setting up of an Rs 274.60 billion refinery by its subsidiary, Chennai Petroleum Corporation Ltd (CPCL). This will be CPCL’s third refinery. It currently operates a 10.5 million tonnes Manali refinery in Tamil Nadu. It also has a smaller 1 million-tonne Nagapattinam refinery. The board of directors of CPCL in April this year recommended the setting up a new 9 million tonnes a year refinery, which has been approved. IOC currently holds a 51.89 per cent stake in CPCL while National Iranian Oil Company (NIOC) holds 15.40 per cent.
“The board of directors of IOC at the meeting held on September 22 accorded an in-principle approval for setting up a new 9 million tonnes per annum refinery at Cauvery basin, Nagapattinam to carry out pre-project activities,” IOC said in a regulatory filing. The final approval of the project would be obtained after preparation of a detailed feasibility report of the project.
Meanwhile, murmurs of a possible merger of CPCL with IOC have become stronger. Finance Minister Arun Jaitley in his Budget 2017 had suggested the merger of oil companies to create mega public-sector oil major that will add more value to shareholders.
However, sources in the company said the focus of the management is expansion. CPCL has plans to revamp hydrogen generation units, gas turbines and boilers at an estimated cost of Rs 4.21 billion, in order to utilise natural gas as feed in hydrogen units and also as a fuel in Manali refinery. The natural gas will be supplied by the LNG project being set up by IOCL at Ennore. The project is expected to be completed in phases by next year.
CPCL 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. After this, 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 government stake in 2000-01.