State-owned refiner Hindustan Petroleum Corporation (HPCL), whose 9-million-tonnes-per-annum (mtpa) refinery at Ratnagiri in Maharashtra has been hanging in the balance due to environmental issues for more than two years now, is hoping that the expansion at its Visakhapatnam refinery doesn?t meet the same fate.
Officials said that for the project to be completed by 2015-16 as planned, prompt environmental clearance is a must. In fact, officials told FE that work on the project was to be started this year but so far it has not received the requisite approval though it submitted its plan to the environment ministry a couple of months back. HPCL?s plan is to expand the Visakhapatnam refinery to 15 mtpa from the current 9 mtpa.
The expansion, which is expected to cost about R15,000 crore, would increase the refinery?s Nelson complexity index, or capacity to process low-quality crude and convert it into value-added products such as petrol and diesel, to around 9 from the current 5. A higher the index number indicates that the refinery is more expensive, but also that the value of its products is higher.
Indian refiners have been looking to increase their complexity to protect gross refining margins (GRMs), or the difference between the price of crude oil and value of refined petroleum products, which have been squeezed by high crude oil prices and a weakening rupee.
There?s still no clarity on the fate of HPCL?s proposed Ratnagiri refinery, which ran into environmental hurdles some two years back. The company is still waiting for an environmental moratorium on projects in the region to be lifted.
The Madhav Gadgil report in 2011 called for limited industrial activity in the area to protect the ecology of the Western Ghats. However, HPCL hopes its project would be cleared as it proposes to use clean technology.
?The environmental issues mostly concern power projects and mining because of the fragile ecology of the region, but our greenfield project would use state-of-the-art environmentally friendly refining technology,? an HPCL official said.
?We?re hoping for the embargo to be lifted soon,? he added, declining to put a definitive time frame on getting environmental approval.
The Western Ghats are described as an ecologically sensitive zone and many projects in the region have been held up as a result of environmental issues.
The refinery, which is expected to cost Rs 20,000 crore, would have a Nelson complexity close to 12, similar to those at private players Reliance Industries and Essar Oil.
HPCL expects to scale up capacity to 42 mtpa in the next five years from the current 16 mtpa.
The company does not have any alternative plans to boost capacity at present in case environmental issues scuttle the proposal to set up the plant at Ratnagiri, the official said.
HPCL has a 6.5-mtpa refinery in Mumbai, where it has currently put expansion plans on hold, and also has a joint venture (JV) plant in Bathinda with a company controlled by billionaire Lakshmi Mittal. HPCL has no immediate plans to enter another JV for a refinery, nor does it expect to list its current JV with Mittal in the near future.
Meanwhile, state-run peer Bharat Petroleum Corporation (BPCL) is ?close? to announcing its initial public offering for Bharat Oman Refineries (BORL), a 50-50 joint-venture with Oman Oil Corporation that runs a refinery at Bina in Madhya Pradesh where 6 million tonnes of crude oil can be processed per year, a BPCL executive told FE on Wednesday.
FE reported last September that BORL shares are expected to be priced at Rs 40-45 apiece when it lists before the end of calender year2013.
The HPCL share, which has gained 3.3% since the start of the year, closed down nearly 1.7% at Rs 300 on the BSE, while those of BPCL lost 1.7% to end at Rs 390.65 on Wednesday.