SBI Caps, it may be recalled, was hired by BPCL to do a total valuation of the Essar refinery which is being commissioned in Vadinar two years down the line. The Ruias, in turn, have asked PricewaterhouseCoopers to do an independent appraisal of not only the refinery but also other projects like the steel plant.

"It is only natural that a professional organisation like EIL be hired for such a complex exercise," sources said. A team from the PSU has already visited the site and will now check out the progress made, costs incurred and possibly draw up a projection of the overall cost of the refinery. Till that is done, it would make little sense for BPCL to consider a stake in the project, sources added.

EIL, the leading engineering andconsultancy company in the country, has been serving the process industry comprising petrochemicals, refineries, pipelines, offshore platforms, etc, for nearly three decades now. The company provides a complete range of project services in these fields including process design, EPC (engineering, procurement and construction) management and commissioning & plant start up.

In the meantime, BPCL has already made it clear that it would need to acquire Essar Oil's 80 mw captive power plant as a pre-requisite to picking up a stake in the refinery.

The condition would imply that Essar Oil will now have to rework its deal with Marathon of the US where the latter has expressed its intent to buy the captive power plant for $42 million (Rs 180 crore). This is in addition to its total buyout of Essar Power, a deal estimated at $170 million (Rs 720 crore).

The oil PSU has also reiterated that the storage and import facilities of Essar Shipping will also have to be factored before considering any equity participationin Essar Oil. BPCL is reportedly of the view that if these conditions are not met, there is just no point considering a stake in Essar Oil.

The Ruias, it is learnt, have also been in talks with Oman Oil Company for a stake in the project. Oman Oil is incidentally BPCL's partner in the six million tonne Bina refinery whose progress has been thwarted due to environmental hurdles.

Experts believe that if things go according to plan, Oman Oil and BPCL could end up sharing the equity in Essar Oil along with the Ruias. A crude supply arrangement with Oman could also be worked out in such an arrangement though the current pace of progress does not indicate any such proposal being contemplated. A distinct advantage accruing to BPCL would be a stake in the Rs 4,400 crore Central India pipeline (connecting Jamnagar to Gwalior) where a tentative 11 per cent has been earmarked for Essar Oil without any provision for the oil PSUs.

Reports in financial circles suggest that the oil PSU is adopting a cautious attitudeand will take its time before it decides to pick a stake in the refinery. The key to the deal will be the price of the stake and that explains why independent opinions have been sought on the issue. Observers say that it would be to BPCL's advantage to participate in the equity of the project as it presently has only one refinery in Mumbai which cannot satiate its vast network of over 4,500 retail outlets.

The location of the Essar Oil refinery is ideal as it would help BPCL target the northern market once a product pipeline is in place. This could either be through Indian Oil Corporation's Kandla-Bhatinda pipeline or even the mega Central India pipeline. This network could transport the products from the refineries of Essar Oil, Reliance Petroleum and IOC's at Koyali--all in Gujarat.

To Essar Oil, a strategic partner would be the best bet especially one with enormous experience in the oil sector. Given that the project is scheduled to be commissioned only by the end of next year, BPCL's presence would bea great level of comfort in situations where there are cost-overruns. The oil PSU's retail strength is also expected to be a value-added input for Essar Oil though it already has a marketing pact with IOC in place. The Ruias, it may be recalled, had roped in Morgan Stanley over two years ago to suggest the possibilities of a strategic partner for the refinery.