News Article

BP in talks with Indian start-up to supply crude

MUMBAI, March 25 (Reuters) - Oil major BP Plc (BP.L) is in talks with Indian start-up CALS Refineries Ltd (CALS.BO) to supply crude oil and buy petroleum products, officials at the two firms said on Tuesday.

'There is a discussion where we hope to sign a memorandum of understanding quickly,' Pia MacRae, BP's spokeswoman in India, told Reuters.

She said BP had no plans to purchase equity in the refinery. CALS plans to dismantle a German refinery and set it up at Haldia in the eastern state of West Bengal. The project is expected to start operating in the first quarter of 2010 and will have a capacity to process 100,000 barrels per day.

The refinery was acquired by CALS last year from German firm Bayernoil's Ingolstadt facility, said Arun Ramachandran, a president at CALS, adding the company would soon sign an initial agreement with BP for sourcing crude.

BP Integrated Supply and Trading, which is holding the talks, also has agreements with other Indian refiners, including Reliance Industries (RELI.BO), MacRae said.

CALS has engaged London-based consultants KBC for dismantling the refinery and re-constructing it in India, Ramachandran said.

'The refinery is currently operational and will be handed over to us by end of June. We are spending $1 billion on the entire project,' he said.

'We have reconfigured the refinery to use both Arab light and Arab heavy crudes and plan to add a delayed coker to it,' he said.

Ramachandran said CALS had raised $200 million last year through an issue of global depositary receipts and plans to raise another $100 million from a strategic investor.

'The rest $700 million would be raised in debt in Indian and overseas markets,' he said.

He said last week CALS signed an agreement with the West Bengal government for acquiring land for the refinery.

Shares in CALS Refineries ended 4.9 percent higher at 44.90 rupees in a Mumbai market that surged 6.1 percent. ($1 = 40.1 rupees) (Reporting by Hiral Vora; Editing by Ranjit Gangadharan)