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The Guru Gobind Singh Refinery (GGSR) in Bhatinda is the latest project to try and boostrefined hydrocarbon product capacity in India. With the world price of crude oil going

forever upward India would like to be in the position of being able to produce enough refinedfuel products for the domestic market and possibly, as in other Asian countries, have enough

capacity for export as well.

In August 2007 the Punjab government put the long-delayed Guru Gobind Singh refineryproject at Bhatinda back on track by signing a deed of assurance with the main contractorHindustan Petroleum Corp Ltd (HPCL). The nine-million-tonne refinery has been on thedrawing board since 1999 and with the signing of the deed, HPCL has begun the groundworkat the project site.

Petroleum Minister Mani Shankar Iyer ruled out shifting of the project from Punjab to a newsite at Rajasthan as Rs3bn ($80m) had already been spent on the project. In addition, the stategovernment has promised financial incentives for the project. The refinery is due to comeonline in January 2011. The products from the refinery will be moved out in three ways pipeline (line proposed from Bhatinda to Udhampur), road and rail.

HISTORY OF THE BHATINDA PROJECT

Originally, the refinery was to be set up in joint venture with Aramco of Saudi Arabia andPSIDC each holding 26%. However, Aramco withdrew as it was teaming up with Shell for aseparate downstream venture. With the withdrawal of Aramco, the company approachedExxon Corp of the USA. In February 1999, Exxon Corp withdrew from the project as it feltthe project was unviable.

There were two other refineries being implemented, RIL's 27mtpa refinery at Jamnagar andEssar Oil's 12mtpa refinery at Vadinar. Petronet India has also planned a 2,290km cross-country pipeline which would cater to the north and central India. Exxon, therefore, believed

that there was no market and hence opted out.

Following the withdrawal of Exxon from the project, leading groups like Mobil, Petronas andBirlas were not interested in partnering HPCL in the project. BP was involved in the projectuntil recently having dropped out in June 2006. HPCL now intend to complete the projectwithout any foreign involvement (Mittal Energy has been given clearance to invest).

GURU GOBIND FINANCE

In July 2007 the Guru Gobind Singh Refinery Ltd closed an Rs80bn ($1.93bn) financing dealfor the refinery at Bhatinda. The project is sponsored by HPCL (51%) and Mittal EnergyInvestments (49%). SBI Capital acted as financial adviser and initial lead arranger in the

financing, bringing a consortium of 25 banks and the Life Insurance Corporation together.

"The products from the Guru Gobind Singh Bhatinda refinery will be moved out in threeways pipeline, road and rail."

The lenders comprise Allahahad Bank, Andhra Bank, Bank of Baroda, Bank of Maharashtra,Canara Bank, Central Bank of India, Corporation Bank, Indian Bank, Life InsuranceCorporation, Oriental Bank of Commerce, Punjab National Bank, Punjab and Sind Bank,State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of India, State Bank of

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Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra, State Bank ofTravancore, Syndicate Bank, The Federal Bank, Union Bank of India, United Bank of India,

UCO Bank and Vijaya Bank.

CONSTRUCTION

HPCL acquired the 2,000 acres of land for the refinery project in September 1998 at a cost ofRs660m ($16m). HPCL has so far completed site grading and construction of internal roadsalong with area lighting and the drinking water system. Foundation for product tanks havebeen completed and brick pitching job inside the refinery site is in progress.

An 18km-long approach road has been constructed and completed between Bhatinda-Dhabwali road (NH-64) to the refinery site. This was constructed under the supervision of the

Punjab PWD at a cost of Rs235m ($6m) on a 50:50 cost sharing basis between GGSR and theGovernment of Punjab (GOP). A 12km-long water canal has also been laid to the refinery site

at a cost of Rs73m ($2.5m).

The PSEB is in the process of installing hardware for providing the required construction

power at site. At the refinery site 1,600 acres of operational area is being levelled and gradedand roads are being constructed. Tenders are being finalised for providing fire fightingfacilities, effluent treatment facilities, product despatch facilities and covering 350 acres ofland.

FURTHER DEVELOPMENTS

HPCL has stated that they also plan to set up a petrochemical project at the Bhatinda refinerycomplex at a cost of Rs5,000bn to Rs6,000bn ($1.2bn). The petrochemical plant could be anaphtha cracker or aromatic complex, which would help add economic value to the refinery.The refinery would produce LPG, naphtha, kerosene and diesel etc. The Punjab governmentis also looking at the possibility of this leading to further opportunities for downstream

petrochemical projects.

To make crude available for the refinery, HPCL has decided to build a 1,011km pipelinefrom Mundra, Kachchh district, Gujarat, to Bhatinda, running through the states of Gujarat,Rajasthan and Haryana. About 310 acres of land have been acquired for the crude oil terminalat Mundra and site development work for 185 acres have been completed.

"HPCL has stated that they also plan to set up a petrochemical project at the Bhatindarefinery complex."

HPCL is now seriously scouting for a partner to carry on with the project. ABB Lumus of

The Netherlands carried out the detailed feasibility report on the pipeline and the projectreceived CCFI (Cabinet Committee on Foreign Investment) clearance in 2002.

Engineers India Limited (EIL) was then appointed as the project management consultant forthe construction of a single point mooring (SPM), crude oil terminal at Mundra (Gujaratcoast) and cross country crude oil pipeline.Competent authorities for acquiring Right of Use(ROU) in the states of Gujarat, Rajasthan and Haryana have been appointed. The design andpreparation of various tenders are in an advanced stage.