IOC drops plan to set up Algerian refinery

NEW DELHI: Indian Oil (IOC) has abandoned its plan to invest in the 15-million-tonne greenfield refinery in Algeria, being commissioned by Algerian state-owned Sonatrach. IOC has also declined Sonatrach’s offer to forge partnership for fuel oil upgradation and n-paraffin projects in the Skikda refinery.

IOC is not willing to join hands with Sonatrach as a minority shareholder in the project, a company source said. Earlier, Indian Oil had expressed its interest to pick up an equity in Sonatrach’s new grassroots refinery project in Algeria. It was also interested in partnering with the Algerian firm as a long-term operator and service provider for its refinery project. IOC was shortlisted as one of the qualified bidders for Sonatrach’s refinery project.

“The company (IOC) did not participate in the subsequent bidding process as Sonatrach was offering it a minority stake in the project. It was indicated that IOC would get only 35% equity stake in the project,” the source said. IOC, which was also expecting equity oil in lieu of its investment and services, did not find such commitments from Sonatrach. “Therefore, it was decided not to pursue this project any further,” an official in the company added.

It is understood that IOC may review its decision if Sonatrach accepts its demand. A high-level government delegation is likely to visit Algeria and it is expected that the issue could be revisited, he said. IOC has, however, decided not to participate in Sonatrach’s fuel oil upgradation and n-paraffin/LAB projects as these projects were not found economically viable. The company informed its decision to the Swiss financial institution Swicorp. Swicorp had evinced interest to tie up with IOC for implementing the two projects at the Skikda refinery in Algeria.

The grassroots LAB refinery project in Algeria is not viable in the light of surplus capacity globally. Even the n-paraffin project is not economically viable due to recent commissioning of GTL projects in Qatar, he said.

IOC is, however, interested in setting up a gas-based cracker and associated polymer complex in Algeria in a joint venture with Sonatrach. Due to availability of gas, the project is economically viable, he added.