Sources said that Exxon's decision was "by and large expected" given the tepid interest by multinational oil companies to investments in refineries. All of them are keen to get a foothold in marketing first but that would have to be preceded by fulfilling one of the two conditions: a) invest Rs 2,000 in the equity of a refinery or b) produce three million tonnes of crude annually in India. These conditions have been stipulated in the Nirmal Singh committee report on oil reforms for a company to qualify for marketing petro-products.

With Exxon dropping out, the ministry will have to explore the following alternatives if the Rs 15,000-crore project has to be commissioned as per schedule in the Ninth Plan. The first is that HPCL can go it alone but this is not advisable,analysts say, given the high cost of the refinery and allied infrastructure. Roping in a partner, they add, makes more sense.

Two, the Punjab State Industrial Corporation (PSIDC) can pitch in with a 26 per cent stake and team up with HPCL. The state-owned corporation has indicated that it will be ready to do so but observers are not sure if it has the financial muscle to muster money for its stake. Further, PSIDC is keen on a petrochemicals complex in the same site and is in talks with Indian Oil Corporation on the issue. Even here, it will confine its stake to 10 per cent, and it is, therefore, unlikely PSIDC can manage a greater level for the refinery also.

The ministry could seek the help of the Oil & Natural Gas Corporation (ONGC) to help HPCL as it did last time when Saudi Aramco, the original partner for the Bhatinda project, dropped out. At that time, unconfirmed reports said that ONGC's participation was sought as a desperate measure because there was no way the project would be sacrificed by thestate government. This was when Exxon entered into a memorandum of understanding with HPCL, and ONGC's role became redundant.

The upstream major, in any case, will not be inclined to partner HPCL for other reasons. It has recently entered into an understanding with the Indian Oil Corporation (IOC), where the two will work together in petro-related activities both here and abroad. Further, after the 10 per cent crossholding deal between the two navratnas, ONGC would logically examine a refinery proposal involving IOC first.

The latest on this front is that ONGC has decided to lie low on a foray into refining, which means that no decision is expected on its role in IOC's Paradip project or Bharat Petroleum Corporation's Bina refinery. Sources also say that the petroleum ministry is keen ONGC concentrate on its key strengths of exploration and production first before contemplating an entry into the refinery sector. The oil public-sector unit has also forked out over Rs 2,000 crore for its crossholding inIOC and the Gas Authority of India, which means that it would like to be slightly conservative in spending more for a new activity like refining.

The Punjab government is, however, not likely to accept the idea of the Bhatinda project being shelved for want of a partner. At the time the Planning Commission ruled that the refinery was not a practical proposition, there was tremendous pressure on the Centre from Punjab to stick on to the original schedule and get the project going. It will be the same this time around despite the setback from Exxon's withdrawal.

BPCL could be roped in

A theory floating in Delhi circles is that BPCL could team up with HPCL for the Punjab project. The two companies are in talks on sharing infrastructure like terminals but experts say this could be extended to joint participation in refineries also. "When setting up a grassroots refinery costs at least Rs 7,000 crore, it makes sense for two strong public-sector units (PSUs) to share the costs rather than one stickingits neck out," they say.

Further, following the intention of Indian Oil Corporation and Oil & Natural Gas Corporation to work together in a series of operations, observers reiterate that other oil companies also need to think of such a joint approach to survive in a deregulated environment. The moot point, however, is if Bharat Petroleum Corporation is ready to shift location from Bina to Bhatinda, and if this is not feasible, the reverse could also occur where Hindustan Petroleim Corporation chips in as an equity partner for the Bina refinery also.