Chennai Petro mulls Rs 10k-crore investment for capacity addition

Chennai Petroleum Corp, a subsidiary of state-owned Indian Oil, is planning a three-fold capacity expansion at its 3-mtpa refinery in Manali with an investment of Rs 9,000-Rs 10,000 crore, a company official said. Chennai Petroleum director (finance) NC Sridharan said the expansion would be funded through the refining margins over the next five years.

?If there is a consistent refining margin of $6 per barrel over the next five years, the project will be completely funded,? he said on the sidelines of a conference organised by the University of Petroleum & Energy Studies. Sridharan added that if the margin is less than that, the company might have to borrow.

The company is mulling expansion of its existing refinery, as it company might have to put on hold plans for a new refinery in Ennore because of environment issues. ?We could not get environmental clearance for the greenfield (15 million tonne a year) refinery at Ennore in Tamil Nadu because of the presence of a wildlife sanctuary,? Sridharan said. The alternate land offered by the state government was not feasible due to distance.

The company is planning to add 6 million tonne capacity to the existing 3 mtpa at the Manali refinery within four to five years. ?This will cost us Rs 9,000-10,000 crore,? he said. He also said the Manali facility currently processes 70% sour crude, and the firm has plans to gradually raise it to 85% by 2013/14.

CPCL has two refineries with a total capacity of 10.5 million tonne a year. The company is de-bottlenecking one of the crude distillation units to raise capacity of the unit to 4.4 million tonne from 3.8 million tonne.

Overall, the refinery capacity will go up to 11.1 million tonne, he said, adding that after the Rs 10,000-crore expansion of the old unit, the company would have a capacity of over 17 million tonne. Sridharan said the de-bottlenecking would cost Rs 400 crore and the process would be completed this year. State-owned Bharat Petroleum too is on an expansion spree. The company would invest about Rs 3,000 crore this fiscal, its director of finance SK Joshi told reporters here.