The other partners in the Rs 1,100 crore plan are Hindustan Petroleum Corporation and Mangalore Refinery and Petrochemicals with 13 per cent equity each and Petronet India with 26 per cent. Once IOC subscribes to its equity portion, the balance 22 per cent will be offered to strategic and financial investors.

The Fortune 500 company has, however, made it clear that its role needs to be defined clearly as HPCL is the lead company for the pipeline. IOC would also seek details on its board representation in Petronet-MHB. "Unless these issues are clarified, the question of IOC's equity participation still remains uncertain," top sources said.

The other obstacle to IOC's presence could come from HPCL which has stated that the project already has two oil companies accounting for 26 per cent of the equity and any further representation from the petroleum industry should be confined to five per cent. While HPCL officials were unavailable for comment on the issue, sources said that the matter would now have to be referred to the board of Petronet India.

HPCL's objection to IOC's entry is still not clear as the PSU holding in MBPL will only be 39 per cent (26 per cent of IOC and HPCL's 13 per cent) well below the 51 per cent mark which would make the project government-controlled. This also holds good for the Cochin-Karur pipeline where Bharat Petroleum Corporation and Cochin Refineries hold 26 per cent and 23 per cent each as also the Chennai-Tiruchi-Madurai network where IOC and Madras Refineries will jointly account for 49 per cent.

Experts say that it makes enormous sense for IOC to participate in the equity of MBPL as the pipeline will not only carry products from MRPL but also imports from Mangalore and those diverted from Kandla. With mega refineries like Reliance Petroleum and Essar Oil adding to the refining capacity in Gujarat, the presence of another pipeline could ease traffic on the Kandla-Bhatinda network.

IOC also has sufficient expertise in pipeline management and would therefore be an ideal support for the project, observers add. The Fortune 500 company has terminals at vital points along MBPL which would be of great help as regards the product distribution pattern.

The original equity pattern of MBPL involved HPCL, MRPL and Petronet taking 26 per cent apiece with the balance proposed to be offered to financial and strategic investors. Subsequently, MRPL and HPCL pared their stakes to 13 per cent each. Unconfirmed reports indicated that MRPL was "peeved" as it was not been given the right to nominate either a chairman or managing director for the pipeline. The government is believed to have made it clear that this prerogative would be confined to Pertronet and HPCL where each would nominate either the chairman or MD.

MRPL had apparently been pressing for this right for quite a while now and the government's stand could have prompted the company to reduce its stake in MBPL. Also, the fact that HPCL is the co-promoter of MRPL may have compelled the two companies to prune their stakes in the project.

MBPL will be 364 km long and designed for a final throughput of 8.5 million tonnes. However, other facilities like a pumping system and loading facilties are currently designed for a throughput of 5.6 million tonnes. The pipeline will transport motor spirit, superior kerosene oil, high speed diesel, aviation turbine fuel and naphtha from MRPL. It will cater to the consumption zones of Karnataka and Andhra Pradesh and would be configured as: a despatch terminal at Mangalore consisting of mainline and booster pumps, pig launchers, sump pump and tank; a tap off terminal cum intermediate station; and a receiving terminal at Devengothi.

The consumption zones to be fed by the pipeline are Hassan, Mysore, Shimoga, Coorg, Chickmagalore, Chittradurga, Bangalore, Tumkur, Kolar, Mandya and Guntakal, Ananthapur, Kurnool and Mehboobnagar (Andhra Pradesh). The projections indicate that supply from MRPL needs to be augmented by imports at Mangalore port to meet the local demand. Inclusive of the demand for naphtha, the demand to be catered by MBPL during 2001-02 and 2006-07 will be four million tonnes and six million tonnes respectively.

INSIGHT:

Makes perfect sense

It makes a lot of sense for IOC to pick up a stake in the Mangalore-Bangalore pipeline to be commissioned by Petronet-MHB as the company will be using the facility to import products and marketing it in the southern market. As the pipeline is expected to be commissioned by end-2002, i.e. post-deregulation, cost of transportation is expected to play a major role in a market determined pricing era. As cost of transportation by pipeline is much lower than other means, and taking into account the retail network of IOC in the southern region, investment in the pipeline makes logistic sense.

-- Shishir Asthana