Indian refiners commit to 1.2mn b/d downstream project
Delhi, 15 June (Argus) — Indian state-controlled refiners have formally committed to building a huge refinery and petrochemical complex on the country's west coast, despite continuing doubts over how the project fits into the government's long-term energy strategy.
The 1.2mn b/d, $40bn refinery in Maharashtra is expected to be ready in 2022, according to India's biggest refiner IOC, which has a 50pc stake in the project. The refinery will produce fuel meeting Euro 6 emissions standards and will be able to process a wide range of light and heavy crude grades. State-controlled refiners Bharat Petroleum and Hindustan Petroleum will each own 25pc stakes.
The Indian government is considering foreign investment in the project. Saudi Arabia is keen to enter into exclusive negotiations with India for a stake in the refinery, oil minister Dharmendra Pradhan said.
The project will be located in Maharashtra's Ratnagiri district, which is home to a 5mn t/yr LNG import terminal operated by state-controlled Gail. The first 800,000 b/d phase of the refinery will cost more than $15bn and include an aromatics complex, naphtha cracker and polymer facilities, and will be followed by a 400,000 b/d second phase. The refinery will be commissioned 5-6 years after the completion of land acquisition, a key hurdle for any Indian infrastructure initiative.
The project has already faced several delays. An initial agreement took more than a year to be signed despite the involvement of state-controlled companies and the oil ministry, likely because of land acquisition problems. And state-run firms do not have the resources to spend on the project without the participation of private-sector investors, which are not keen to commit unless they can secure some marketing rights for the fuel.
Delhi is also sending mixed signals about the importance of oil to the country's future energy mix. Earlier this year it announced a plan to have a fleet of only electric vehicles by 2030, aiming to kill demand for transport fuels in one stroke and replace it with battery-powered cars and bikes. This would remove a massive source of oil demand and force existing and new refineries to focus on industrial customers or exports.
Plans for the new refinery were first revealed by Pradhan in December 2015. State-controlled refiners, which were not initially involved, were then asked to make detailed plans to undertake the project.
India's oil product demand in May increased by 5.4pc to 17.79mn t from 16.87mn t a year earlier, according to preliminary oil ministry data. Diesel demand increased by around 8pc over the period to 1.81mn b/d, while gasoline sales rose by 15.3pc to 655,000 b/d.
India is already a net oil product exporter, with refining capacity at 4.6mn b/d dwarfing demand. The oil ministry expects Indian refining capacity to surge to 12mn b/d, without specifying a timeframe.