Country’s largest refiner Indian Oil Corporation Ltd (IOC) bottom line would get a boost of 20-30 per cent after the 15 million tonnes per annum (mtpa) greenfield project in Odisha is fully commissioned by FY18. In FY15, IOC posted a net profit of Rs 5,273 crore, lower than Rs 7,019 crore in FY14.
“This (Paradip) refinery would contribute nearly 20-30 per cent to the company’s profit and would offer one of the best refiining margins,” said G S Singh, executive director (technical) at the Paradip refinery project of IOC. The project, conceived in 1992 and final investment approved in 2009, would be formally inguarated by Prime Minister Narendra Modi on February 7.
The refinery would run anywhere between 60-80 per cent of its installed capacity in 2016-17, while attaining the full utilisation in FY18. It is one of the most complex (or modern) refineries in India which has the capability to process nearly 150 different type of crude oil available globally.
Singh, who lead a tour of the project built at a cost of Rs 34,555 crore, said that the refinery is expected to show a gross refinery margin (GRM) of $14-15/barrel, highest among all the IOC refineries at the current prices. GRM is the difference in dollars per barrel between its product revenue and the cost of raw materials.
With the full commissioning of Paradip refiner, IOC’s total refining capacity would increase 80.7 million tonnes per annum (mtpa) from 65.7 mtpa now – the highest in the country. IOC is second by Mukesh Ambani-promoted Reliance Industries at 60 mtpa and Ruias-promoted Essar Oil at 20 mtpa capacities.
However, IOC would have to spend another Rs 4,000 crore to upgrade it to produce BS-VI category fuel. Currently, it is equipped to roll out BS-IV fuel. In a bid to curb vehicular pollution, India will go straight from BS-IV complaint petrol and diesel to BS-VI fuel by 2020, Petroleum Minister Dharmendra Pradhan said last week.
IOC believes that most of the petrol, diesel and cooking fuel produced from the refinery would meet the demands in eastern and southern markets of the country. “As on date, the domestic demand does not call for any exports. However, exporting options to Indonesia, Malaysia and Australia are open as we meet the fuel quality norms in these countries,” said S Bhattacharyya, general manager at Paradip redinery project of IOC. The domestic consumption of petroleum products were 158. 2 million tonnes during FY14, which has jumped to 164.98 million tonnes in FY15.
The Paradip refinery has been graded with Nelson complexity index of 12.2 (which shows the refinery complexity), while RIL’s 33 mtpa refinery at Jamnagar in Gujarat has Nelson complexity index of 11.3, and it is 11.8. for Essar Oil’s 20 mtpa refinery in the same state.
Previously, analysts expected the throughput of IOC to increase to about 60 million tonnes in FY15 against 54 million tonnes in FY14. This was because Paradip refinery was scheduled for commissioning during June-December 2014.
In addition, IOC has decided to set up a polypropylene project at Paradip with an estimated cost of Rs 3,150 crore and targeted to be commissioned by September 2017.
Globally, there has been a lackluster performance of refiners because of overcapacity and sluggish demand. Most of the recent refining capacity addition has taken place in the Asia-Pacific and Middle East.