India's Hindustan Petroleum Corporation Targets Refining Capacity of 800,000 Barrels per Day

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading Indian refiner and petrochemicals producer Hindustan Petroleum Corporation Limited (BSE:500104) (HPCL) (Mumbai) has announced plans to triple its refining capacity from 280,000 barrels per day (BBL/d) to 800,000 BBL/d by 2017. The augmentation program will increase the output of oil products for HPCL's retail business. Sources have indicated that presently the company's oil sales at retail outlets exceed its refining capacity. To meet the oil products demand, HPCL is forced to buy products from other refiners.

HPCL operates two wholly owned refineries at Mumbai and Vishakapatnam in Andhra Pradesh. The Mumbai refinery's production capacity is 139,000 BBL/d, while the Vishakapatnam refinery produces about 160,000 BBL/d of oil products. HPCL also holds a 16.95% stake in the 192,000 BBL/d refinery and petrochemicals complex operated by Mangalore Refinery and Petrochemicals Limited (BSE:500109) (MRPL) (Mangalore, Karnataka) in Mangalore. The company's business interests include aviation fuel, refining, liquefied petroleum gas (LPG), lubes, energy exploration and production, bulk fuel, and retail. Currently, HPCL holds 25% of the market share in India's refining sector and accounts for about one-tenth of the nation's total installed refining capacity. The company operates the country's biggest lube refining and production facility, which accounts for nearly 40% of lube-base oil production in India.

Some of HPCL's ongoing projects include the 180,000-BBL/d refinery constructed as a 50:50 joint venture with Mittal Energy Investment Pte Limited (Singapore). The refinery, located at Bhatinda in Punjab, will likely be completed by late 2011. HPCL is also seeking to procure land in the coastal region of Maharashtra to set up a new refinery. Feasibility studies for the project are reportedly under way. Earlier reports indicated that the company was exploring options to sell land at its Mumbai refinery. The funds from the reported sale were expected to be utilized for expansion projects. HPCL has been unable to carry out refining capacity expansions in Mumbai due to infrastructural issues.

HPCL has put its proposed 300,000-BBL/d refining and petrochemicals complex at Vishakapatnam on hold. According to K. Murali, the director of refineries at HPCL, no decision has been taken about restarting the project. HPCL had announced plans to build the project as a joint venture with Oil India Limited (BSE:533106) (Noida, Uttar Pradesh), Total SA (NYSE:TOT) (Paris, France), GAIL India Limited (BSE:532155 ) (New Delhi) and Mittal Energy. However, the project went into limbo after Mittal Energy and Total pulled out.

On April 15, 2010, the company began carrying out a scheduled shutdown at its crude distillation facility in Mumbai for a 45-day period. Activities during the shutdown are expected to increase production capacity and improve energy efficiency by 15%. Following the Mumbai shutdown, the fluidized catalytic cracking unit (FCCU) at Vishakapatnam will also be closed for 70 days, beginning in June. HPCL plans to complete the 31,000-BBL/d FCCU by June this year and begin commercial operations by September. By September 2011, the company's diesel hydrotreater units at Vishakapatnam and Mumbai are expected to come online. These units will assist in production of a variety of fuels that meet international emission guidelines.

Industry experts have observed that, spurred by the global economic recovery, Chinese and Indian refiners are gearing up for an increase in demand by augmenting their production capabilities. The ability of the region's refining companies to process a wide range of feed, including heavy crude, is helping producers enjoy higher margins and greater export volume. However, lower production efficiencies and overcapacity is forcing refiners to shut down older facilities in the U.S., Asia and Europe.

In March this year, crude production in India declined 0.4% to 3.29 million BBL/d. The decline is thought to be the first dip in production since July 2009. According to the recently published report by the International Energy Agency (IEA) (Paris, France), global oil demand is forecast to reach 86.6 million BBL/d this year, in comparison to 84.93 million BBL/d in 2009.

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