The committee has now insisted that an international consultant be appointed to apprise the viability of ONGC's participation in the Rs 7,500 crore refinery scheduled for commissioning during 2003-04. The project, more commonly referred to as Bharat Oman Refinery (BORL), was planned as a 26:26 joint venture between Bharat Petroleum Corporation and Oman Oil.

ONGC had planned to take a stake of up to 24 per cent so that the combined PSU participation in the plan would be confined to 50 per cent and it would thereby retain the status of a non-government company. The project looked promising given its locational advantage in the product-starved Madhya Pradesh region. As per the original proposal, ONGC could supply heavy crude from its fields in Gujarat as feedstock to BORL. A separate pipeline was also planned by the promoters to convey crude imports from Vadinar to Bina. The products of the refinery would be carried through a pipeline linking Bina to Kanpur via Jhansi. This network was proposed to be commissioned by Petronet India, the joint venture pipelines company.

Interestingly, ONGC offered to take a stake in BORL more than five years ago when it looked as if the project would be commissioned on time. It has been hanging in the balance since thanks to environmental hurdles which ave resulted in cost over-runs of over Rs 2,000 crore. The delay prompted ONGC to drop its plan which has only recently been renewed.

The company still needs to get approval from its navratna directors, a section of whom are believed to be "bitterly opposed" to the BORL proposal. The petroleum ministry is not too happy either and maintains that ONGC must confine itself to its key strengths of exploration & production at a time when crude prices are shooting through the roof and the country needs to desperately increase its reserves.

In its turn, ONGC has justified its move to diversify into the downstream sector stating that this is the only route to becoming an integrated oil company on the lines of international counterparts like Shell and Exxon Mobil. Observers of the oil sector, in fact, reiterate that ONGC will "perish quickly" if it continues to function with one hand tied behind its back. They believe that sole expertise in exploration will not allow ONGC to hold its own once the oil sector is completely deregulated in April 2002.

Incidentally, Oman Oil, the co-promoter of BORL, has conveyed to partner BPCL hat it needs time till end-October to confirm its participation in the project. The long wait for the refinery's commissioning has been exasperating for the company which has since been courted by the Ruias for a stake in Essar Oil's 10.5 million tonne facility in Vadinar, Gujarat.

Sources say that Oman Oil has been far more receptive to the Essar proposal as the refinery is half-complete and will be operational by the end of next year. Essar Oil has also achieved financial closure for the project which has prompted other companies like Indian Oil Corporation to consider equity participation here.

The Centre has, however, told Oman Oil in "no uncertain terms" that it must not back out of BORL as it epitomises a sovereign agreement between India and the Sultanate of Oman. It has apparently said that Oman Oil is welcome to invest in Essar Oil, so long as the Bina project is not given the cold shoulder.

BORL was one of the three joint sector refineries envisaged by the Centre way back in 1993, the other two being the west coast refinery (a joint venture between Oman Oil and Hindustan Petroleum Corporation, now shelved) and the east India refinery (an alliance between IOC and Kuwait Petroleum where the latter has withdrawn).