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Independent firm buys stake in Indian refinery project

12th April 2012

Commercial operations for Indian refinery due to begin in 2013

Construction of a refinery in Tamil Nadu will be begin this year

Independent oil trader, Trafigura Pte Ltd will take over BP as Nagarjuna Oil Corporation Limited’s (NOCL) crude oil supplier, investing up to USD 130m for a 24 per cent equity stake in oil refinery.

The investment marks the first move by the company into refining in Asia, enabling it to “create operational efficiencies and to add value to its customers’ supply chains”, according to a company statement on 12 April. 

The refinery is being constructed at Cuddalore in the Indian state of Tamil Nadu. Geographically, the facility is well positioned to receive crude oil from Trafigura’s international producer partners, says the company.

In addition to acquiring an equity stake, Trafigura will invest a further USD 120m into building extensive storage facilities and associated infrastructure at the refinery’s 2,500 acre site.

The refinery, to be operated by NOCL, will have an annual capacity of 6m tonnes. It can process 100 per cent heavy/sour grades of crude and will supply light and middle distillates up to European IV standards. Other partners in the project include TIDCO, a Government of Tamil Nadu enterprise, and Tata Petrodyne, a Tata Group enterprise.

The location of the refinery, on the east coast of India, provides numerous strategic advantages including the ability to receive Very Large Crude Carriers (VLCCs) via a single point mooring. It is also well-positioned to meet the needs of the State of Tamil Nadu which currently has a shortfall in the supply of clean petroleum products.

Commissioning work at the refinery is expected to start in 2012 with commercial operations scheduled to begin during the first half of 2013.

Jonathan Pegler Oil Asia Pacific director said the invesment “plays directly to the strengths of Nagarjuna as a leading process operator and to Trafigura as a company committed to balancing international supply and demand for oil products.

"India is fast emerging as a leading hub for oil refining, with domestic demand rising and an increasing trend towards cleaner refined products. In this context, the NOCL Refinery agreement represents a significant development for us…Once fully operational, the refinery will greatly improve the supply of oil products to local retailers.

KS Raju, Nagarjuna Group chairman called the investment a “significant milestone” for the corporation as it seeks to complete construction and commissioning of its six million tonne oil refinery at Cuddalore in Tamil Nadu, India.