Environmental Impact on Taj Mahal Stalls Indian Oil's Mathura Refinery Expansion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Indian Oil Corporation Limited (BSE:530965) (IOC) (New Delhi), India's largest state-run petroleum products retailer, is awaiting government clearance to go ahead with expansion plans for its refinery at Mathura. Concerns have been raised by environmental protection groups about the impact of the expansion on the Taj Mahal, one of India's most revered historical monuments. IOC's Mathura refinery in the state of Uttar Pradesh is located just 25 miles from the Taj Mahal. Environmentalists argue that the sulfur-dioxide emissions have already caused damage to the 17th-century monument, and the expansion of the refinery will only make it worse. The Ministry of Environment and Forests has yet to give a green light for the project.

IOC plans to increase the refining capacity of the Mathura plant from 8 million tons per year to 11 million tons per year. The plant currently processes low-sulfur crude from Bombay High. Bombay High is IOC's offshore oilfield, located about 160 km off the coast of Mumbai. The company also imports high-sulfur crude from the Middle East and low-sulfur crude from Nigeria. The refinery expansion also includes setting up a petrochemical plant that will lower IOC's naphtha export from 2 million tons per year to between 600,000 and 700,000 tons per year.

IOC plans to increase the use of high-sulfur crude and save on crude oil imports. The seven refineries of IOC presently process 50% high-sulfur crude. The company plans to increase this to 76% before 2012 by upgrading refineries. IOC's decision comes as a result of high-sulfur crude oil being available at a discount of $4-$5 per barrel over low-sulfur crude oil. The company is also considering purchasing crude from Cairn India Limited (BSE:532792) (Gurgaon) beginning next year. Negotiations are in progress with Cairn India for 2 million tons of crude at a discount of $18 per barrel.

IOC controls 10 of the 19 refineries in India and has a total refining capacity of 60.2 million tons per year, which accounts for 40.4% of the country's total refining capacity. The company's annual turnover in 2007-08 was $61.7 billion with profits of $1.74 billion. IOC has planned investments of over $10.8 billion in expansion projects during 2007-12. Some are them are currently under way. The Panipat refinery in Haryana is being upgraded from 12 million tons per year to 15 million tons per year at a cost of $177 million. The expansion is likely to be completed by December 2008. Once completed, this refinery will ensure a better supply of petroleum products in India's northwest region.

The company is also planning the acquisition of 100 acres of land next to the Haldia refinery premises in West Bengal to set up a $1.1 billion paraxylene plant. The Haldia refinery capacity expansion from 6 million tons per year to 7.5 million tons per year is also in progress at a cost of $640 million. The expansion will be completed by December 2009. The refinery and petrochemical project at Paradip, Orissa, costing $5.7 billion, will be completed by 2012 and will have a capacity of 15 million tons per year. Some of the other projects in progress include the residue upgrade and quality improvement project at Gujarat at a cost of $1.3 billion to be completed by January 2010, the 181-mile Chennai-Bangalore product pipeline project to be completed after environmental clearances at a cost of $50 million, and the Paradip-Haldia pipeline to transport crude oil to the Haldia and Barauni refineries from Paradip to be completed by December 2008 at a cost of $258 million.

IOC officials are hopeful that early environmental clearances for the Mathura refinery and other expansion projects will ensure that IOC's ambitious investment and augmentation plans will be carried out successfully.

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