Phase-III Refinery Project

After delays and cost escalations in phase-III of its refinery project, Mangalore Refinery & Petrochemicals Ltd, a subsidiary of ONGC Ltd, is now at the crossroads regarding the project execution methodology for the project. The project aims to augment its refining capacity from 9.6 million tpa to 15 million tpa.
Officials are discussing the best possible methodology for various units of the project that are on the critical path. For instance, sources claim that in case the petro-fluidised catalytic cracking (PFCC) unit of the project is awarded on LSTK basis, the mechanical completion may not be achieved by October 2011, as approved by the company board earlier, and could extend up to January-February 2012.
"While phase-III was to have achieved mechanical completion by June 2010 and the original estimate was Rs 7,943 crore, we have been beleaguered by an overheated market hampering the appointment of process licensors, delay in land acquisition, and steep increase in steel and cement prices in the last 12-18 months," U.K. Basu, Managing Director, MRPL, was quoted as saying on the company's website. The project estimate has been revised to Rs 12,412 crore.
The second unit on the critical list is the sulphur recovery unit (SRU). The process design licensor for this unit is yet to be finalised in the absence of design basis data, which is now being developed based on inputs from various other process licensors.
Senior MRPL officials confirmed to Projectmonitor that it had recently received approval for the final project execution methodology of the phase-III project. The company board has cleared the selection of Engineers India Ltd as the project management consultant for executing the PFCC and SRU units on OBE-LSTK methodology, followed by Chennai Petroleum Corporation Ltd for its DHDT/ISOM units. EIL will be awarded the contract on nomination basis on terms and conditions to be negotiated and finalised by a high-powered board committee, since the tendering process failed.
Only two bidders - Larsen & Toubro Ltd and Bharat Heavy Electricals Ltd - responded to MRPL's global tender for the project. Although L&T qualified, it has indicated that it would not submit bids, leaving only Bhel in the fray.
Among the other components of the project, the DHDT unit will be executed through LSTK; CDU/VDU through EPCM consultants, LSTK tender to be cancelled; HGU through LSTK; CPP through Bhel on nomination basis; DCU through four LSTK contracts with certain free issue materials; HCU revamp, utilities and off-site through EPCM; and CHT unit via LSTK.