New Delhi: State-owned refiner Hindustan Petroleum Corp Ltd (HPCL) and gas utility GAIL India Ltd are looking at jointly setting up a multi-billion dollar petrochemical plant in Andhra Pradesh.


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They are exploring the possibility of a petrochem project after their plans to team up with France's Total, Lakshmi N Mittal Group and Oil India Ltd (OIL) for a 15 million tons a year refinery-cum-petrochemical plant at Visakhapatnam in Andhra Pradesh fell through.


"That project fell as partners pulled out one after the other due to weak global demand," a top official said. "Now, HPCL and GAIL are looking at setting up a petrochemical plant at the Petroleum, Chemical and Petrochemicals Investment Region (PCPIR) sites identified by the state government."


GAIL, the official said, is taking a lead in doing the feasibility studies as well as site selections.


Cost, capacity and equity structure of the project will be decided after the studies are completed.


GAIL is taking a lead in the project as it has expertise in building and operating a gas-based petrochemical plant, the official said.


HPCL owns a 6.5 million tonne refinery at Mumbai and a 8.3 million tonne unit at Vizag. While the Vizag plant is being expanded to 15 million tonnes, HPCL is also setting up a 9 million tonnes refinery at Barmer in Rajasthan at the cost of Rs 37,320 crore.


The official said HPCL has got land for expanding the Vizag refinery to 15 million tonne and the project will be completed by 2017.


HPCL had in 2007-08 planned an only-for-exports refinery to target demand in South East Asia and the Middle East.


The five-way alliance of HPCL, explorer OIL, gas utility GAIL India, Mittal Investment Sarl and Total had in October 2007 signed a memorandum of understanding to look at the feasibility of setting up the Vizag project.


In 2009, the Rs 50,000 crore project was put on hold as petrochemical demand then was seen as too weak to justify the investment.


Total did pre-feasibility for the refinery project and demand studies, while GAIL was in charge of the study of the petrochemical unit.


But the project was in 2010 put on back burner before equity structure could be decided.


While the refinery was to be built to process sour and heavy crudes, which are cheaper than low-sulphur sweat crude oil, the petrochemical plant was to use the naphtha produced in the refinery as feedstock.


The petrochemical plant being talked about now will use natural gas as a feedstock, the official said.