PM launches construction work of HPCL's $6.8-bn Barmer refinery

Prime Minister Narendra Modi on Tuesday announced the start of construction work of the $6.8-billion refinery at Pachpadra, in Barmer, Rajasthan, which would add to the existing national refining capacity amidst surging demand.

State-run refiner Hindustan Petroleum Corp Ltd (HPCL) is setting up the 180,000-barrel-per-day refinery and petrochemical project in tie-up with the Rajasthan government.

Addressing a large and enthusiastic public meeting on the occasion of the commencement of work for the Rajasthan Refinery, the prime minister spoke about the UjjwalaYojana for cooking gas, and the significant progress made in electrification of 18,000 unelectrified villages.

The prime minister complemented chief minister Vasundhara Raje and union minister of petroleum Dharmendra Pradhan for their commitment towards the implementation of the project.

The foundation stone for the project was first laid in September 2013 by the then ruling Congress Party chief Sonia Gandhi. However, the project failed to take off as the state government had not given adequate incentives.

The project is now estimated to be completed by 2022-23, petroleum minister Dharmendra Pradhan said.

To make the project viable, the state government has offered an interest-free loan of Rs16,845 crore ($2.63 billion) to HPCL to be paid back in 15 years from the commissioning of the project, Pradhan added.

The Rajasthan refinery will have to bear the cost of crude transportation as well as deal with water scarcity, said an oil industry source.

Pradhan said underground water will be drilled in the region and will be desalinated and used in the refinery. A senior HPCL official said a water pipeline is being considered.

Rajasthan accounts for a meagre 1.07 per cent of water resources in the country, according to official data.

Pradhan said the Rajasthan refinery will buy about 50,000 bpd oil from the nearby oilfield operated by Cairn India Ltd, a unit of Vedanta Resources.

However, a senior HPCL executive said his company prefers to fully operate the refinery on Vedanta's oil to cut transportation costs.

''The ability to process imported crude oil, commonly known as 'swing capacity', will also be built,'' he explained.

Modi said the project will create employment for thousands of people in Rajasthan which elects a new state assembly in December.