HPCL officials were unavailable for comment on the development. However, if talks with Exxon turn out favourably, the two partners will hold 26 per cent each in the project with the balance being offered to financial institutions and the public.

HPCL and Exxon are not strangers to each other and have, in fact, recently entered into a memorandum of understanding to market the American company's select lubes in HPCL's retail outlets. These will be non-competing brands while the other lubes of Exxon will be vended through its own bazaar trade operations.

The Punjab refinery, with a capacity of nine million tonnes, is scheduled to be commissioned in Bhatinda by 2002. The costof the project is estimated to be around Rs 15,000 crore. This includes the crude pipeline from Vadinar in Gujarat to Bhatinda, a 500 mw power plant to be located near the refinery and a product pipeline which will extend from Bhatinda to Udhampur in J&K.

The project was first planned at six million tonnes but was later expanded to nine million studies after the findings of the detailed feasibility report. Sources say that this could be increased further to 12 million tonnes at a later date. By 2002, the corporation's total refining capacity will be 31 million tonnes, assuming that the expansions at Visakhapatnam and Mangalore Refinery and Petrochemicals are complete.

HPCL has kept options open on partners for the Punjab refinery.

Interestingly, even as talks are on with Exxon Corporation, sources say HPCL has offered ONGC a stake in the Punjab refinery.

The latter is, however, of the opinion that it will confine its participation in any downstream project to 20 per cent. ONGC has also receivedoffers from Indian Oil Corporation and Bharat Petroleum Corporation for their joint sector refinery projects.

BPCL is believed to be keen on offering ONGC up to 26 per cent in its Uttar Pradesh refinery where the original partner in the project was Shell. Now, with Aramco and Shell planning a joint venture, BPCL is looking for alternatives on the lines of HPCL. Thus far, among the joint sector refinery projects, only one foreign partner-Kuwait Petroleum Corporation-has assured its participation with IOC in the Paradip (Orissa) project.

Sources have also indicated that Indian Petrochemicals Corporation has been offered a stake in the Punjab refinery. There has been no confirmation on this development and even if it turns out to be true, IPCL would not be inclined to pick a stake of over 10 per cent. Like ONGC, IPCL is also believed to be considering participating in IOC's Paradip project as it would translate into ready supply of feedstock for its petrochemicals business.

Though the Planning Commissionhas, reportedly, not been very gung-ho about HPCL's Punjab project, sources say the ministry of petroleum and natural gas feels otherwise. The centre has also been under pressure from the Punjab government to get the project going as it means a lot to the state.

Insight -- deregulation holds the key

HPCL's move to tie up with Exxon for the Punjab refinery is a welcome move as it will benefit from the technology transfer. However, most foreign players are primarily interested is marketing. Foreign oil companies want the marketing sector opened up, but it is moot point whether they would want to extend refinery relationships to marketing if they can come in on their own.

Interestingly enough, only one foreign partner has so far assured participation in joint sector refinery projects-Kuwait Petroleum Corporation has tied up with IOC in the Paradip (Orissa) project. If the government is truly looking towards the possibility of attracting further foreign equity participation in such refinery projects,from the likes of Aramco and Shell, it would do well to think seriously on the lines of decontrolling the petroleum sector as per the Nirmal committee recommendations.