Work to setup Barmer refinery, a dream project of Congress government in Rajasthan, resumes

Rajasthan govt will provide an interest-free loan of Rs 11.23 bn a year for 15 years for the refinery project. It will receive a 12 per cent return on investment

Work to setup Barmer refinery, a dream project of Congress government in Rajasthan, resumes
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Prakash Bhandari

The proposed Barmer refinery and petrochemical complex, a Rs 44,000 crore oil refinery, which is a dream project of the Congress government, has started rolling after suffering several hiccups. The refinery will come up at Pachpadra village in the border district of Barmer.

The work on the refinery had suffered a setback because of the coronavirus pandemic, but it has now picked up pace with the joint venture company starting various processes to set it up.

The project is the first of its kind in Rajasthan and is being developed by a joint venture (JV) between Hindustan Petroleum Corporation Limited (HPCL, 74%) and the Government of Rajasthan (26%) stake. It will be known as HPCL Rajasthan Refinery Limited (HRRL).

The new refinery and petroleum complex will have a total processing capacity of nine million metric tonnes per annum (MMtpa). It will be used for the production of BS-VI grade motor spirit and diesel fuel, as well as other products including ethylene and propylene derivatives. The derivatives will be used as feedstock in industries, such as textiles, packaging and petroleum. It is expected that with the derivatives available, it would lead to the setting up of more industrial units and thousands of job opportunities.

The project received environmental clearance in September 2017 and final approval from the Government of India in October 2017. Construction on the project commenced in January 2018 and is scheduled to be completed by 2022.

“The development is estimated to cost $6.8bn and will create approximately 1,500 direct jobs upon completion, as well as up to 40,000 indirect jobs during construction. It is also expected to contribute to Rajasthan’s economic development and aid in the development of downstream petrochemical companies” said Mukesh Kumar Surana, chairman of the HPCL.

The refinery and petrochemical complex will be built on 4,813 acres of land approximately 5 km away from Pachpadra village in Barmer district. It will be located 100km from Jodhpur Airport and benefit from connections to National Highway NH-112.

The proposed facility will feature a total of 29 process units, including a 9 MMtpa crude distillation unit, a 4.8 MMtpa vacuum distillation unit and a 1.8 MMtpa naphtha hydro-treating unit.

It will also include a diesel hydro-treatment unit with a capacity of 4.1 MMtpa, a vacuum gas oil treatment hydro-treater with a capacity of 3.5 MMtpa and a petro fluidised catalytic cracking unit with a capacity of 2.9 MMtpa.

Other units will include an isomerisation unit with a capacity of 0.26 MMtpa, a dual-feed cracker unit with a capacity of 82,000 tpa, an ethylene recovery unit with a capacity of 77,000 tpa, two polyethylene units with a capacity of 0.416 MMtpa and two polypropylene units with a capacity of 0.49 MMtpa. The polypropylene units will feature Lummus’ NOVOLEN process reactors and NHP catalyst.

The Barmer refinery is expected to process 1.5 MMtpa of crude indigenously produced in Rajasthan at the Mangala fields, 7.5 MMtpa of Arab and other crude, as well as natural gas during its initial eight years of operations. It will also process 9 MMtpa of Arab mix crude, as well as natural gas, following its eighth year of operation.

The refinery and petrochemical complex will include various common units and utility systems, such as a benzene recovery unit, a hydrogen generation unit, an amine regeneration unit, a sour water stripping unit and a sulphur recovery unit.

Additional utilities will include internal fuel oil and fuel gas systems, a compressed air and nitrogen plant, a condensate system, raw water and cooling water system and as a boiled feed-water treatment system.

The facility will feature various technologies in multiple units, including a naphtha hydro-treating unit and a semi regenerative reformer.

It will be powered by an on-site captive power plant consisting of four gas turbine generators of 33 megawatts (MW) each and five 26 MW steam turbine generators. The water for the refinery will be sourced from the Indira Gandhi canal through pipelines which have already been laid.

The refinery will also include offsite facilities for the storage of crude oil, intermediate products and finished products.

The refinery project faced numerous hiccups with the change of government in the state. In March 2013, when there was a Congress government headed by Ashok Gehlot as the Chief Minister, a Memorandum of Understanding (MoU) for the development of the Barmer refinery was originally signed by HPCL and the Government of Rajasthan with an investment of Rs 372.3 bn ($5.74 bn).

HPCL and the Government of Rajasthan also signed a joint venture (JV) agreement in July 2013 to implement the project via the HPCL Rajasthan Refinery Limited (HRRL) JV.

The project was initially approved by the Government of India in September 2013. The state government initially agreed to provide the JV with an interest-free loan of Rs 3.73bn ($575.93 mn) per year for a 15-year period.

However, the new BJP government under Vasundhara Raje opposed the terms of the agreement regarding the government’s allocated stake and reviewed the deal in July 2014. The BJP government stated that the project was grossly expensive and the cost factor should be reviewed.

A new JV agreement was subsequently signed by the government and HPCL in August 2017 to develop the project with an investment of Rs 431.29 bn ($6.8 bn).

The Government of Rajasthan will provide an interest-free loan of Rs 11.23 bn ($177 mn) a year for 15 years under the new arrangement. The state will receive a 12 per cent return on investment from the refinery project.

HPCL entered a debt syndication agreement with a State Bank of India (SBI) led consortium for a loan of Rs 287.53bn ($4.05bn) for the project, in January 2019. The agreement marked the financial closure of the refinery and petrochemical project.

Axens Technologies was awarded a contract to provide advanced technologies for the facility in April 2019. The contract includes the supply of proprietary equipment, catalysts and adsorbents.

McDermott International won a contract to provide basic engineering design of two polypropylene plants. Engineers India Limited (EIL) received a Rs 50bn ($689.24m) contract to execute the refinery project.

HRRL has awarded the contract for setting up the duel feed cracker unit worth Rs 7000 crores to L&T Hydrocarbon Engineering (LTHE). There was a stiff competition with international companies also bidding for it, but finally the Indian company was awarded the contract on merit. L&T Hydrocarbons is a wholly-owned subsidiary of the Mumbai-based Larsen & Toubro group.

L&T was awarded the contract after the financial bids submitted by two bidders (Petrofac and L&T Heavy Engineering) for Petro FCC (EPCC-03) Package and three bidders (Tecnimont +JGC, Petrofac and LTHE) for DFCU (EPCC-07) Package in December 2020 were opened.  Petrofac’s bid got disqualified for both the packages, said another source.

The scope briefly involves the engineering, procurement, and construction of two critical process blocks of an 9.0 MMTPA integrated Refinery cum Petrochemical Complex. Licensor for both the blocks is Technip FMC and Project Management Consultant is Engineers India Ltd.

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