Chennai Petroleum to Invest $1.4 Billion on Expansion and Connectivity Projects During Next Five Years

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Researched by Industrial Info Resources (Sugar Land, Texas)--Chennai Petroleum Corporation Limited (BSE:500110) (CPCL) (Chennai, Tamil Nadu) has announced plans to invest $1.4 billion during the next five years on connectivity and expansion projects. CPCL is a subsidiary of India's national oil company, Indian Oil Corporation Limited (BSE:530965) (IOC) (New Delhi).

According to K. K. Acharya, CPCL's Managing Director, the company has drawn up plans for projects worth about $1.49 billion. CPCL has earmarked 400 acres of land outside Chennai that will be acquired to implement the company's refinery expansion plans. The company has outlined plans to invest $718 million in setting up a high-conversion residue-upgrade unit to ramp up the refinery's distillate yield and reduce the production of low-value fuel oil.

CPCL intends to invest about $533 million to set up a diesel hydrotreater with a capacity of 1.5 million tons per year, a naphtha hydrotreater and an isomerization unit with a capacity of 150,000 tons per year that will ensure that the diesel and petrol produced meet the Euro IV standards as required by the Indian government's Auto Fuel Policy. According to the policy, from April 2010, high-speed diesel and motor spirit sold in the Indian market must meet Euro IV equivalent specifications in 11 Indian cities and Euro III equivalent specifications in all other parts of the country. The project is scheduled for completion by the end of this year.

An investment of $96 million is planned to increase the capacity of the Manali refinery from about 200,000 barrels per day (BBL/d) to 225,000 BBL/d. The Manali refinery expansion project includes a de-bottlenecking plant and is scheduled for completion by the end of 2009. The refinery is located in the Thiruvallur district of Tamil Nadu.

A single buoy mooring (SBM) would be set up near the Ennore port with an investment of $164 million. The SBM would be able to receive cargo from very large crude carriers with capacities ranging between 260,000 and 270,000 dead weight tonnage (DWT). The crude would be transported by an undersea pipeline to Ennore for storage, while another pipeline would transport the crude to the refinery. The company has acquired 60 acres of land to construct the storage facility. Six storage tanks with a combined capacity of 360 million liters are being set up. At present, the company can bring in vessels with capacities of up to 60,000 DWT to the Chennai port. The project also includes replacement of the existing 30-inch-diameter pipeline from the Chennai port to the refinery with 42-inch pipe. The SBM project is scheduled for completion in four years. When completed, the SBM will significantly reduce crude transportation costs.

CPCL recently inaugurated a $50 million seawater desalination plant in Kattupalli, Tamil Nadu, that will make the firm self-sufficient in terms of water requirements. Based on the principles of reverse osmosis, the desalination plant has a capacity of treating 5.8 million gallons per day of water. The cost of water will be halved with the commissioning of the desalination plant. The plant had been procuring 30 million liters of water from Chennai Metro Water, and this will now be available to the general public. An aviation turbine fuel pipeline was also inaugurated on the same day. The $10 million, 95-kilometer pipeline connects the Chennai Airport to the Manali refinery.

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