The Rs 7,500 crore project identified for location in Paradip, Orissa, is scheduled to be commissioned in 2004-05. It was part of three joint sector refineries envisaged by the Centre in 1993 for the oil navratnas. IOC's original partner was Kuwait Petroleum Corporation (KPC) which recently withdrew from the project.

Similarly, the central India refinery was proposed to be a joint venture of Bharat Petroleum Corporation (BPCL) and Oman Oil while the west coast refinery, planned as an alliance of Hindustan Petroleum Corporation (HPCL) and Oman Oil, has since been shelved. The other two projects have not even got off the ground and their promoters - BPCL and IOC - are ready to implement them on their own.

Foreign oil majors have, time and again, reiterated that it makes little sense to invest in grassroots refineries when there is more money to be made in the profitable arena of marketing. This explains why big names like Shell, Exxon, KPC and Saudi Aramco dropped their plans of entering the refining sector here. Some have, instead, focused on some private sector projects which are already functioning or in the process of being commissioned. KPC had, at one stage, told IOC that it would bring a second partner for the Paradip refinery to which the Fortune 500 company said that it would have the right to exercise a similar option. At that point, the Oil and Natural Gas Corporation (ONGC) was exploring the possibilities of participating in the project's equity but dropped out subsequently.

Tired of waiting for KPC to make up its mind about picking a stake in the refinery, IOC decided to go it alone and the board approved of an initial investment of Rs 750 crore in the project. KPC also sent its formal communique of withdrawal but added that it was keen on particpating with IOC in other key petro-related activities as well as a long term crude supply arrangement.

Over the last few months, west Asian interest in the Indian refining sector has increased what with deregulation of the oil sector scheduled to happen in April 2002 and handsome gains to be made in retail trade of petro-products.

The three companies which have now begun talks with IOC are as keen on picking up a stake in Mangalore Refinery and Petrochemicals, the joint venture between HPCL and the AV Birla group of companies. KPC is already close to signing an MoU with the company while TotalFinaElf of France is another keen contender.

Saudi Aramco, it may be recalled, was HPCL's original partner for the nine million tonne Bhatinda refinery scheduled to be commissioned during 2006-07.

The company, like other oil multinationals, was of the opinion that it made little sense to invest in refining when marketing products was distinctly the more profitable option.

Along with the Netherlands-based Shell, Aramco presented a proposal to the ministry of petroleum and natural gas which involved one of the three oil PSUs - IOC, HPCL and BPCL - hiving off its retail outlets to a new company.

These assets would be valued and corresponding equity to the extent of 50 per cent would be brought in by Shell and Aramco. The balance equity would be held by the PSU concerned. The petroleum ministry shot down the proposal following stiff opposition from oil majors. The Centre then made it clear that any company keen on entering direct marketing would have to first invest Rs 2,000 crore in refining infrastructure.