IOC and KPC have been in constant talks over the past few months and it is still not certain if the latter will subscribe to its 26 per cent stake in the nine million tonne refinery. The project was one of the three planned in the joint sector, the other two being the west coast plan (Hindustan Petroleum Corporation and the Oman Oil Company, now put on hold) and central India refinery (Bharat Petroleum Corporation and Oman Oil).

The east coast project is scheduled to be commissioned by the end of the ninth plan in 2002. KPC, like other global oil companies, is reportedly having second thoughts and has insisted that it be given marketing rights also, an ideathat IOC is not averse to. Despite this, the low margins on refining may eventually defer KPC from investing in the project.

However, with Mobil, Petronas and Marubeni willing to throw their hats into the ring, sources are of the opinion that IOC will not have a problem with the refinery. The Fortune 500 company is also believed to have intimated the government that it is willing to go alone in the project if the need so arises. "This refinery is an important part of IOC's agenda and there is no way it will be shelved or put on hold for any reason whatsover," sources added.

Interestingly, both Mobil and Petronas have also indicated their interest in picking up a stake in the nine million tonne refinery at Nagapattinam, Tamil Nadu, being promoted by IOC and Madras Refineries. The project, estimated to cost around Rs 7,500 crore, is expected to be commissioned only after 2002. While IOC and MRL will hold 26 per cent each in the equity, the third partner, be it Petronas or Mobil, is likely to hold only anominal stake of around 15 per cent.

The perceived reluctance by KPC is not too surprising, say experts, as other big oil companies have also backed out of refinery projects. Shell, for instance, was planning a 26:26 venture with BPCL for a 7.5 million tonne refinery in Uttar Pradesh but has backed out. Likewise, Saudi Aramco was HPCL's original partner for the Punjab project but withdrew to be replaced by Exxon Corporation.

Both Shell and Aramco rightly identified marketing of petro-products as the more lucrative option and decided to team up in a 25:25 downstream venture with the balance equity to be held by one of the three oil PSUs - IOC, BPCL or HPCL. The catch, however, was that the company concerned would have had to transfer its retail outlets to the new joint venture as its equity contribution, something which none of the three wished to do.

KPC, likewise, is keen on marketing rights and as per the Nirmal Singh committee's recommendations, it would qualify given that its investment in therefinery would be at least Rs 3,000 crore. Unconfirmed reports have also said that IOC is ready to share a reasonable chunk of its marketing infrastructure with KPC but whether that is enough to draw the company remains to be seen.