Aggressive expansion by India?s oil refiners like IOC, BPCL and Essar Oil planned for the next few years is set to transform the country into a strong exporter of finished petroleum products, beating regional rivals like South Korea and consolidating its edge over China and Japan.
India, with an existing refining capacity of 194 million tonne a year, is set to expand it to 238 million tonnes next year and further raise capacity to 310 million tonnes by 2016-17, a senior petroleum ministry official said. India now consumes 142 million tonnes of fuel and exports the balance. Thanks largely to Reliance Industries, petroleum products were the country?s highest revenue earner among mercantile exports, collecting $42 billion last fiscal.
The idea is to make refinery products exports an important business proposition for other players, including public sector enterprises. Banking on exports could give some cushion to state-owned refiners, considering the losses they incur in domestic sales at regulated prices, though it means making risky assumptions on global demand for energy in times of economic uncertainty.
Sector watchers said the country was set to fulfil the promise of becoming an export hub for refined products. ?India and South Korea were neck-and-neck in 2011 in terms of refined products exports. With South Korean refining capacity set to remain stagnant at best at its current 2.82 million barrels per day, India will take pole position as a products exporter if it proceeds with its growth plans,? said Vandana Hari, Asia editorial director at global energy information provider Platts.
While Essar Oil has plans to boost refining capacity at Vadinar by more than three-fold to 38 million tonnes by 2016-17, IOC will have a new 15-million-tonne refinery at Paradip in Orissa in a year and an extra 5-million-tonne capacity at its Koyali refinery.
The Koyali refinery now produces 13.7 million tonnes a year.
HPCL is doubling its 8.3 million tonne refinery at Visakhapatnam and is setting up a new 9 million tonne plant in Maharashtra. BPCL is planning to nearly double capacity at its 9.5 million tonne refinery in Kochi.
While India?s closest competitor in fuel exports, South Korea, has no major expansion plans, China is expected to go ahead with an aggressive capacity addition, though it is mainly meant to meet its domestic consumption growing at about 5.5% a year. Analysts said Chinese firms were expected to add 710,000 barrels a day of capacity this year, more than double it achieved a year ago, and another 640,000 barrels per day next year. Beijing is expected to stay way behind India in petroleum products exports at about 300-600,000 barrels a day, they said.
Considering the price volatility in global markets and the pressure on refining margins, India?s state-run oil companies are now investing on capacity to process heavier and high sulphur crudes. IOC chairman R S Butola recently told FE that the company, which earned $4.31 from processing a barrel of crude in the first nine months of this fiscal compared to $5.05 a year ago, has a plan ready to boost margins. The idea is to source more difficult-to-process crude from Iran, Iraq and Saudi Arabia that would to replace the lighter North African varieties. More of Indian refiners including Essar Oil are now aiming to have highly complex refineries that would process the cheapest and heaviest of crudes such as Reliance Industries? Jamnagar refinery.
