Chennai refinery expansion cost goes up over Rs 3,600 crore

New Delhi: Indian Oil Corporation Limited (IOCL) on Thursday said it will raise its stake in the joint venture building a 9 million tonnes refinery at Chennai to 75 percent after the cost to the project escalated by over 12 percent.

Originally, Indian Oil and its subsidiary Chennai Petroleum Corporation Ltd (CPCL) were to hold a 25 percent stake in the joint venture that was to build a new unit adjacent to the existing refinery of CPCL. The remaining 50 percent equity was to come from financial investors.

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In a stock exchange filing, Indian Oil said its board at its meeting on Thursday "accorded approval for the revision in cost of the project from Rs 29,361 crore to Rs 33,023 crore".

The cost increased Rs 3,662 crore or 12.5 percent.

"The Board has also accorded approval for revision in the capital structure of the joint venture with 75 percent equity from Indian Oil and 25 percent equity from CPCL," it said.

The company however did not give reasons for the cost escalation.

Indian Oil said its board had on January 29, 2021 approved the implementation of a 9 million tonnes a year refinery at Cauvery Basin, Nagapattinam in Tamil Nadu by CPCL at an estimated cost of Rs 29,361 crore, to meet the demand of petroleum products in southern India.

Alongside, approval was also given for the formation of a joint venture between Indian Oil and CPCL with equity holding of 50 percent and balance 50 percent to be held by financial/strategic/ public investors. Thereafter, the joint venture company named 'Cauvery Basin Refinery and Petrochemicals Ltd' (CBRPL) was incorporated on January 6, 2023.

The unit was to come up in 48 months.

Indian Oil had planned to pull down the 1 million tonnes a year Nagapattinam refinery of its subsidiary CPCL and build the brand new 9 million tonnes unit.

National Iranian Oil Co (NIOC) is not a partner in the project.

NIOC holds 15.4 percent in CPCL and was previously keen to participate in the expansion project. However, US sanctions on Iran had put constraints on that.

NIOC's investment in CPCL had been made several years back and that as such will not draw any impact of US sanctions but the impact of fresh investment in the company could have risked sanctions.

Indian Oil holds a 51.89 percent stake in CPCL.

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