News Article

Italian tips for Cals Haldia project

Italy’s Saipem will prepare the feasibility report for Cals Refineries’ proposed facility in Haldia.

Saipem, a subsidiary of Eni SpA, will get the engineering contract for the refinery if the feasibility report satisfies the concerned parties.

“If the parties reach an agreement on the terms of the proposed feasibility report within 80 days, the company will award Saipem the lump sum EPCC contract for the project,” officials said.

Saipem is one of the largest and well-known turnkey contractors in the oil and gas industry, the officials said.

Cals has envisaged the project in three phases — a capacity of 100,000 barrels per day in phase I to be expanded to 200,000 barrels per day in phase II and 400,000 barrels per day in the third phase.

For the first phase, Cals will ship a refinery from Germany and had entered into an agreement in 2008 to buy Bayernoil’s Ingolstadt facility through Lohrmann International.

The refinery will be dismantled in Germany, shipped and put back in Haldia.

However, a legal case on the sale of Ingolstadt has delayed the project. The dispute is likely to end soon as an out-of-court settlement is being worked out, sources said.

According to the sources, awarding the contract to the Italian firm indicate a settlement was at an advanced stage.

The project ran into rough weather after the global financial crisis.

Funding problems were partly solved with the entry of Kuwait’s Kharafi Group, which agreed to invest $150 million in global depository receipts last year.

Cals recently announced plans to induct Hardt Group affiliates as a strategic investor.

Analysts said, “Hardt has a track record in financing and arranging international refinery relocation projects, which is Cals’ main strategy.”

Sources said the commissioning of the first phase was delayed by a year to 2013 because of the resource crunch, resulting in the refinery losing the seven-year tax holiday.

Officials said Cals had entered into agreements to purchase two refineries — Cenco Refining Company (the US) and Atas Refinery (Turkey) — owned by affiliates of Hardt Group on a refurbished basis for the second phase.

BP, formerly British Petroleum, would supply 2.5 million tonnes of heavy crude and a similar quantity of light crude for processing in the refinery, which will be the second- largest in Bengal after Indian Oil Corporation’s facility in Haldia.

Euro-IV compliant Cals Refineries will produce aviation turbine fuel, LPG and pet coke for the domestic market.

It plans to produce petrol and diesel for export, which BP is interested in buying.