IndianOil to set up refinery in west coast

IndianOil, India’s biggest crude oil refining and marketing company, is planning to set up a new refinery in the west coast of India.

The project, which is on the drawing board stage, will help the company gain a foothold in the western India market where it does not have any refinery.

“We are planning to come up with a new refinery in the western part of India by 2020. But as of now the plan is on the drawing board stage,” said RS Butola, chairman and managing director, IndianOil.

Butola, who was earlier heading explorer ONGC’s overseas arm, ONGC Videsh Ltd, said the company is planning a refinery near the coast so that it can import crude at a lower cost and service the western Indian market. The company currently has a refining capacity of 65 million tonne per annum (mtpa) spread across nine refineries directly and one through a subsidiary.

This is the highest crude processing capacity, called as crude throughput, by any company in India.

The second position is enjoyed by Reliance Industries which has a capacity of 62 mtpa.

Though the plans are grandiose as a new refinery would cement IndianOil’s number one position in the Indian refining sector and help meet the gap between its current output and sales, analysts doubt the company’s plans, as one of its most ambitious projects – the 15 mtpa Paradip refinery at Orissa – is still to roll out its first batch of output.

“Almost 87% of the work in the refinery is complete and we plan to commence it by the later part of the next year,” said Butola.

The plan for Paradip refinery was proposed in 2002.

In the last fiscal, the company’s crude throughput was 55.62 mt while its pipelines has a product throughput of 75.55 mt.

This gap was filled by purchasing crude from private refiners such as Reliance Industries and Essar Oil.

Analysts say it is important for public sector marketing and refining companies to set  up more refining capacity as  they have to source petroleum  products from private refiners, which is always at a premium.

Butola, who was addressing the AGM of the company, said during the 12th Five Year Plan, IndianOil plans investments to the tune of Rs56,000 crore. “Out of this, 26% will be on integration and diversification and 74% on core business (refining and marketing),” he said, adding, every year the company will be spending Rs10,000-12,000 crore towards capital expenditure.

While the company continues to focus on its core business, Butola said IndianOil is looking at gas as a major area of growth than conventional exploration and production.

“The corporation is currently engaged in an exercise to enhance its capabilities besides looking at potential upstream exploration and production opportunities in countries such as North America,” he said.