IOC Mulling New Refinery Project in India's West Coast

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's state-operated Indian Oil Corporation Limited (BSE:530965) (IOC) (Mumbai) is reportedly considering construction of a greenfield refinery on India's west coast, in a bid to meet the growing demand for petroleum and petrochemical products. The 14 million- to 15 million-ton-per-year refinery will require an investment outlay of $3.2 billion to $4.2 billion.

IOC has not announced a timeline for the project. "Presently, our focus is on the eastern region," a senior IOC official said. "It is too premature to talk about the new proposed refinery in the west now." The official did say, however, that the project has been planned for a long time.

IOC is reportedly forming a core team that will conduct the necessary feasibility study and decide on the possible location of the greenfield refinery. The site could be in either Gujarat or Maharashtra. If the project is finalized, IOC might form a joint venture to set it up. Western India, however, already houses IOC's largest refinery, the Gujarat Refinery at Koyali in Gujarat. The refinery has a current refining capacity of 13.7 million tons per year and comprises five atmospheric crude distillation units. Plans to increase the refinery capacity to 18 million tons per year also have been reported.

India's current refining capacity is about 130 million tons per year, while demand is increasing at a steady pace of about 4 million tons per year. IOC owns and operates 10 of the 20 refineries in India, and boasts of a total refining capacity of 60.2 million tons per year. IOC plans to invest about $4 billion in its petrochemicals businesses in 2011-12 ,and between $7.5 and $8.5 billion during the next decade.

Another IOC refinery under development is the 15 million-ton-per-year grassroot refinery at Paradip in Orissa. Commissioning of the $6.2 billion project is scheduled to begin in March 2012 and be completed by November 2012. The refinery is being designed to have zero residue, and all products would meet strict international specifications. The refinery products will be targeted mostly at the eastern India market. The refinery project also has been nominated as the nodal industrial outfit for one of India's ambitious Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR), which, if developed, would serve as a hub for both the domestic and international markets and would offer attractive investment opportunities for both. The decision about the PCPIR is likely to be announced in 2011-12.

Other than the Paradip Refinery, IOC is implementing several expansion and upgrade projects in its existing refineries and pipelines. The company, however, intends to focus on its core business of refining in the immediate future, although it has announced plans to increase investment in the wind and solar power sector. A senior IOC official said, "Renewables will be a major area of focus for us. ... It is the way forward. Renewables, biofuels and for that matter even petrochemicals are lucrative for us because they will help us diversify."

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