Bina refinery sights $10 gross refining margins soon

BPCL subsidiary Bharat Oman Refineries Ltd, which owns and operates the Bina refinery in Madhya Pradesh, expects to clock a minimum gross refining margin (GRM) of $10 per barrel once the refinery stabilises by the end of this calendar year,  S Varadarajan, BPCL’s newly appointed director-finance, told DNA.

Refining margin is the difference between the price at which oil companies purchase crude from oil explorers and the price at which they sell the end product after processing the crude at their refineries.

The process involves boiling the crude at high temperatures until it breaks into different products based on weight and properties. The refined products thus obtained are usually petrol, diesel, kerosene, LPG, furnace oil, naphtha etc.

Varadarajan said the refinery has a Nelson complexity of 9.3, which makes it a highly complex one and is sure to enjoy a $3-4 per barrel premium to the benchmark Singapore GRM, which is the average GRM of all major refineries in Asia.

Private refining companies such as Reliance Industries and Essar Oil already enjoy $10/barrel refining margin owing to the higher complexity of their refineries.

Nelson Complexity is a measure of a refinery’s capacity to process low-quality crude and convert it into value added products such as petrol and diesel. Reliance and Essar both have new refineries with Nelson complexity of more than 10.

“Our other advantage is that Bina is an inland refinery which has its own pipeline which adding to additional saving of $1-1.25 per barrel,” said Varadarajan.

In fact, the company is also planning to scale up Bina’s capacity from 6 mtpa to 9 mtpa in the next five years, said R K Singh, BPCL’s chairman and managing director.

On the planned initial public offering of Bina refinery, Singh said BPCL will wait till next year to take a final call.