This story is from March 23, 2006

BP pulls out of HPCL's project at Bhatinda

TNN / Mar 23, 2006, 23:09 IST

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HPCL's dream of building a 9 million tonne refinery at Bhatinda in partnership with BP has been dashed by the UK major's lastminute pullout on Thursday.

BP pulls out of HPCL's project at Bhatinda

NEW DELHI: State-owned Hindustan Petroleum's (HPCL) dream of building a 9 million tonne refinery at Bhatinda in partnership with BP (formerly British Petroleum) has been dashed by the UK major's lastminute pullout on Thursday, ending talks that started during the high-profile visit to India of its chairman John Browne last October.
In a message to Hindustan Petroleum, BP said it is "not very keen" on investing in India.It said the board did not find the Indian conditions favourable for investing in any refining and marketing venture. As a sweetener, the message said it would, however, look forward to working with Hindustan Petroleum in future.
Hindustan Petroleumis now going ahead with the refinery plan on its own. This is in total contrast to the partnership document the two companies signed in front of flashing cameras and a beaming Mani Shankar Aiyar, the then oil minister. The document envisaged a 'strategic partnership' envisaging sharing opportunities in each other's markets.
Facts, as they exist, in the Indianmarketplacemake obvious rationale for BP's move. State-owned firms have a near-total control of themarket and the government forces them to keep prices artificially low.Besides, India is surplus in refining capacity and more are coming up in state and private sectors.

No surprise then that BP is pulling out, particulalry if it was not getting even standing ground from Hindustan Petroleum's existing marketing network. The question is why did it carry the talks so far, spend money on sending teams to India and working out the refinery's economics; and even identify the person to run the unit?
AHindustan Petroleum team returned from London only last week and a BP team was to follow them. The answer, industry sources said, may lie somewhere between two recent analyst reports. While the first said BP can improve its performance globally by separating two businesses, the second by Citi said the present structure is just fine.

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