India's IOC Commissions Paradip-Haldia Crude Oil Pipeline as Total Network Exceeds 10,000 Kilometers

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Researched by Industrial Info Resources (Sugar Land, Texas)--Indian Oil Corporation Limited (BSE:530965) (IOC) (Mumbai), India's largest state-owned oil refining firm, has commissioned a 330-kilometer (km) crude oil pipeline in eastern India, connecting the port city of Paradip, Orissa, to Haldia, West Bengal. With the commissioning of this project on December 28, 2008, the firm entered 2009 with a total pipeline network exceeding 10,000 km and a cumulative throughput capacity of 1.5 million barrels per day (BBL/d) of crude oil.

The $2.95 billion pipeline project involved the installation of single point mooring facilities at the Paradip port for unloading of crude oil by tankers off the coast, construction of a shore tank farm in Paradip, the laying of a 20-km 48-inch-diameter pipeline between the shore tank farm and the SPM facility, and the laying of the 330-km Paradip-Haldia pipeline to connect with IOC's existing Haldia-Barauni crude oil pipeline. The Paradip-Haldia pipeline, with a throughput capacity of about 235,000 BBL/d, traverses about 228 km along the Orissa coast and covers a distance of about 102 km in West Bengal before terminating at IOC's crude oil tank farm at Haldia.

The Paradip-Haldia pipeline was set up to reduce the cost of transportation of crude oil to the Barauni and Haldia refineries, which account for nearly one-fourth of IOC's aggregate refining capacity of about 1.28 million BBL/d. Crude oil was supplied in small consignments to the refineries from the Haldia port since the shallow draft at this port restricted access to ships weighing less than 35,000 tons. However, the Paradip port enables for the delivery of larger consignments in ships weighing up to 150,000 tons, resulting in low transportation costs for IOC.

The Haldia refinery is expected to save an average of $93.5 million per year because of reduced transportation costs by sourcing crude oil from Paradip. The overall refining margin in the two refineries is estimated to improve by $1 per barrel to $1.5 per barrel. The project will also facilitate the expansion of IOC's refining operations in the east, including Guwahati and Bongaigon, among other crude-oil-deficient regions of Assam.

The pipeline will replace a substantial amount of the traffic of petroleum, oil and lubricants through the Haldia port, which, until now, was the third largest port in India in terms of cargo handling, resulting in an annual loss of $37.41 million for the Haldia Dock Complex. Until November 2008, the Haldia port handled 18 million tons of petroleum, oil and lubricant products as liquid cargo. This included more than 257,000 BBL/d of crude oil, of which 128,000 BBL/d was transported to IOC's Haldia refinery, 107,000 BBL/d to the firm's Barauni refinery, and about 42,000 BBL/d to Bongaigon Refinery & Petrochemicals Limited (BSE:500072) (Bongaigon, Assam). With the commissioning of the Paradip-Haldia pipeline, IOC is likely to pull out transportation of 85,000 BBL/d to 128,000 BBL/d of crude oil from the port with immediate effect.

At the start of the present fiscal, IOC had a pipeline network of 9,273 km. The firm plans to add 4,000 km of pipeline to its network before the end of the ongoing Eleventh Five-Year Plan Period in March 2012. IOC is presently working on 13 different projects entailing development of pipeline networks with investments in the range of $520 million to $540 million.

The firm commissioned a pipeline to transport jet fuel in Bangalore, Karnataka, in October 2008. In November 2008, the firm commissioned a 275-km pipeline to transport liquefied petroleum gas from Panipat, Haryana, to Jalandhar, Punjab. Ongoing projects include the augmentation of the Mundra-Panipat pipeline on the west coast that is likely to be commissioned by the end of this month. IOC is setting up two product pipelines, one along the Chennai-Bangalore route and another connecting Koyali in Gujarat with Ratlam in Madhya Pradesh. The firm is also setting up a 94-km pipeline to transport jet fuel from Chennai Petroleum Corporation Limited's (BSE:500110) (Chennai, Tamil Nadu) refinery to the Chennai airport.

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