Chennai Petroleum is in discussions with banks to secure a substantial loan of $3.3bn to support the construction of a major oil refinery in Tamil Nadu, India, Bloomberg has reported.

The state-owned enterprise has garnered interest from potential lenders, with the State Bank of India poised to spearhead the transaction. The deal will be the second-largest local-currency loan in India in 2024.

The investment will facilitate the development of a proposed refinery capable of processing nine million tonnes of oil annually.

SBI Capital Markets, a subsidiary of the State Bank of India, has been appointed as the loan syndication adviser for Chennai Petroleum.

The total cost of the project is estimated to be $3.9bn. Chennai Petroleum's finance director, Rohit Agrawala, stated in April 2024 that the project is expected to take 36 months to complete following federal government approval.

The expansion aims to meet the growing domestic demand within India, which stands as a beacon of growth in a global refining industry facing decline in regions such as the US and Europe and shifting towards petrochemicals in China due to the push for transport decarbonisation.

Indian Oil Corporation is set to own 75% of the new facility, known as the Cauvery Basin refinery project, with Chennai Petroleum owning the remaining share.

Another oil refiner, Bharat Petroleum, is also in negotiations to raise $3.8bn, which could result in the largest local-currency loan in India in 2024.