Bharat Petroleum Corp., India’s third-biggest state-run refiner, plans to sell shares in a unit to partly fund a new refinery and help meet fuel demand in the world’s second-fastest growing major economy.The company, based in Mumbai, plans to raise as much as 30 billion rupees ($763 million) in three to four months through an initial public offering in Bharat Oman Refineries Ltd., S.K. Joshi, the parent’s finance director said in an interview. The unit is building a 103 billion rupee plant in central India, and will borrow 60 billion rupees for the project, he said.

Bharat Petroleum wants to retain its 25 percent share of Asia’s third-largest oil market at a time when Reliance Industries Ltd. is building the world’s biggest refinery. Reliance’s unit tripled in value on the Bombay Stock Exchange in 2007, a record year for Indian share sales.

“We are expanding because we need a refinery to service our customers in central India and the north,” Joshi said yesterday. Work on the new refinery at Bina in Madhya Pradesh state “is going ahead in full swing.”

The 6 million metric ton a year plant is 40 percent complete and contracts worth 80 billion rupees for supplies of pipes, boilers and control panel have been awarded, he said.

Bharat Petroleum is in the process of appointing advisers for the share sale, Joshi said.

Oman Oil Co., which owns 2 percent of Bharat Oman Refineries, wants to increase its share, Chief Executive Ahmed Al Wahaibi said on Dec. 13. Bharat Petroleum holds 98 percent.

Increase Capacity

The fuel producer will spend 20 billion rupees in the year starting April 1 to increase capacity at its plant at Kochi in southern India and upgrade its Mumbai refinery, he said.

The refiner plans to increase capacity at its refinery at Kochi by 2 million tons a year to 9.5 million tons, upgrade its 12 million tons a year Mumbai plant to make cleaner burning fuels and add gasoline stations, he said.

The Kochi refinery’s expansion will be completed in the year ending March 31, 2010, and cost 26 billion rupees, Joshi said.

The refiner’s import of crude oil may increase by 1 million ton in the year beginning April 1 to about 14 million tons because its plants are operating at full capacity, Joshi said. Demand for fuels may rise about 6 percent to 7 percent in the next fiscal year, he said.

Borrowings

Bharat Petroleum’s borrowing in the year ending March 31 may rise to about 160 billion rupees from about 120 billion rupees in the previous period, Joshi said. Government caps on fuel prices result in losses, forcing state-run refiners to borrow to meet routine expenses.

India hasn’t allowed refiners to raise prices since June 2006 even as crude oil costs have surged to a record.

The losses are partly reimbursed through bonds and subsidy payments received from Oil & Natural Gas Corp., the nation’s biggest explorer, and other state-run oil companies.

The company may also sell some bonds given by the government, Joshi said, without giving details. Bharat Petroleum has received 46 billion rupees of bonds as part its compensation.

The government may raise fuel prices to match an increase in crude oil costs, M.S. Srinivasan, the nation’s top bureaucrat at the oil ministry, said Jan 8.

Source : Bloomberg

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