HPCL expects margins to rise from Vizag, Mumbai refinery upgrade

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Published: August 23, 2019 3:50:50 AM

HPCL achieved the financial closure for this project through a consortium of lenders led by SBI in January this year and has started the construction work of filling, piling and building the 27-km long boundary wall.

HPCL, Vizag, Mumbai, HPCL refinery, HPCL refinery upgrade, HPCL share, HPCL mittal energy ltd, HPCL news, industry newsHPCL chairman and MD Mukesh Kumar Surana

State-run refiner Hindustan Petroleum (HPCL) sees an incremental $3-$4 per barrel of refining margins every quarter following the bottoms upgrade and modernisation of its Visakhapatnam and Mumbai refineries by the end of calendar year 2020. HPCL chairman and managing director Mukesh Kumar Surana said the expansion and modernisation of refineries will not just add capacities but will increase the ability to process the dirty and heavier crude with higher complexity.

“This will add another $3-$4/barrel to our gross refining margins after the expansion is complete. At present the bottoms upgrade is going on at Vizag. This will be followed up at Mumbai as at present we are creating space at our Mumbai refinery for the bottoms upgrade facility,” Surana said.

Bottoms upgrade is the process of converting very heavy and dirty crude into distillates, which earlier used to create pet coke. “Our new facilities will directly convert the heavier crude or bottoms into distillates without creating environmentally polluting pet cokes. We are sourcing heavy crude from South America and now increased contracts with the US as well,” Surana said.

In the April-June quarter of 2019 the gross refining margins of HPCL dropped to $0.75 per barrel due to lower crack spreads after crude prices fell in May and June month. HPCL operates three refineries in the country and has undertaken modernisation project for its Visakhapatnam refinery in Andhra Pradesh at Rs 20,928 crore. This project will enhance the refinery capacity from the present 8.33 million metric tonnes per annum (MMTPA) to 15 MMTPA.

The company is also in the process of increasing the capacity at its Mumbai refinery from 7.5 MMTPA to 9.5 MMTPA at a cost of Rs 5,060 crore. The refinery will have the capability to produce fuel for BS-VI compliant vehicles. The completion of these projects will double the profitability of these refineries, he said.

The oil marketer is also setting up a 9 MMTPA greenfield refinery-cum-petrochemical project at Pachpadra in Barmer district of Rajasthan at a cost of Rs 43,219 crore.

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HPCL achieved the financial closure for this project through a consortium of lenders led by SBI in January this year and has started the construction work of filling, piling and building the 27-km long boundary wall.

“While engineering activities are in progress at the site, the project has achieved significant progress with technology selection been completed for all the 13 processing units,” he added.

HPCL has earmarked Rs 74,000 crore as capital expenditure for the next five years. Of this Rs 14,900 crore will be spent in FY20, with majority of fund deployment towards the Mumbai and Vizag refineries, equity for Barmer refinery and pipeline expansions. As of March 2019, the company’s net debt stood at Rs 20,000 crore, down from Rs 27,000 crore last year.

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