Indian Oil Corp (IOC) will be the lead partner with 50 per cent stake while Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) will take 25 per cent stake each.

The three oil refining and marketing companies signed the joint venture agreement here this evening. The pact was signed by IOC Chairman Sanjiv Singh, HPCL Chairman and Managing Director Mukesh Kumar Surana and BPCL Chairman and Managing Director D Rajkumar.

Officials said the 60 million tonnes capacity refinery at Babulwadi, Taluka Rajapur in Ratnagiri district is being set up keeping in mind the future fuel demand and the export potential of the country.

The refinery and the accompanying mega petrochemical complex will be set up in two phases. Phase-1 will be 40 million tonnes together with an aromatic complex, naphtha cracker and polymer complex.

Phase-1 will cost Rs 1.2-1.5 lakh crore and will come up in five-six years from the date of land acquisition, they said.

The entire refinery will include three crude units of 20 million tonnes each — first of these will be part of phase-1.

The second phase will cost Rs 50,000-60,000 crore, they said.

IOC has been looking at West coast for a refinery as catering to customers in West and South was difficult with its refineries mostly in the North.

HPCL and BPCL have also been looking at a bigger refinery because of constraints they face at their Mumbai units.

The refinery will produce petrol, diesel, LPG, ATF and feedstock for making petrochemicals that are basic building blocks in plastic, chemical and textile industries.

Fifteen million tonnes a year is the biggest refinery any public sector unit has set up in one stage. IOC recently started its 15 million tonnes unit at Paradip in Odisha.

Reliance Industries holds the distinction of building the biggest refinery in India till now.

It built its first refinery at Jamnagar in Gujarat with a capacity of 27 million tonnes, which was subsequently expanded to 33 million tonnes. It has built another unit adjacent to it for exports, with a capacity of 29 million tonnes.

The refinery being planned by the state-owned firms will be bigger than that. The phase-1 itself will be bigger than any one single unit.

Being on the West coast will provide the unit a natural advantage of easily sourcing crude oil from the Middle-East, Africa and South America, officials said, adding East coast was not being considered as shipping crude oil there will add at least USD 1 per barrel to cost.

Also, moving products to consumption heartland from west will not be difficult.

India has a refining capacity of 232.066 million tonnes, which exceeded the demand of 194.2 million tonnes in 2016-17 fiscal.

According to International Energy Agency (EA), this demand is expected to reach 458 million tonnes by 2040.

IOC has 11 refineries with a total capacity of 81.2 million tonnes while BPCL has four refineries with a total capacity of 33.4 million tonnes. HPCL has three refineries with a total capacity of 24.8 million tonnes.