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The three state-owned oil marketing companies (OMCs) will come together to build a mega refinery and a petrochemical complex somewhere on the 720km long coastline of Maharashtra in the next two years, oil minister Dharmendra Pradhan said on Monday.
Citing a study conducted by the International Energy Agency (IEA), a Paris-based autonomous body that monitors oil and gas supply and demand globally, Pradhan said India’s demand for petroleum products will increase three times from now to reach 550 million tonnes per annum (mtpa) by 2040. “I take the responsibility to set up one of India’s biggest refineries on the west coast of Maharashtra to meet a part of this huge demand,” he said.
The minister was addressing a gathering organized to inaugurate a new crude distillation unit at Bharat Petroleum Corp. Ltd (BPCL)’s 12 mtpa refinery at Mumbai.
Pradhan said the refinery will be built in association with all the three state-owned oil marketing companies—Indian Oil Corp. Ltd (IOCL), BPCL and Hindustan Petroleum Corp. Ltd (HPCL). The construction of the refinery will begin by March 2017, he said.
Maharashtra chief minister Devendra Fadnavis, who was also present at the event, promised fast-track approvals for the clearances required from the state and pledged to help the companies in the land acquisition process as well.
It is the land acquisition process that has been the biggest obstacle for a refinery in Maharashtra, which is home to only two refining complexes—a 12 mtpa BPCL one and an 8 mtpa HPCL one—located in Mumbai. For a long time, HPCL had been trying to acquire land in the Ratnagiri district to set up a port-based refinery but it failed to do so. The company later shifted the project to Barmer, Rajasthan.
According to the oil ministry website and its statistical body, the Petroleum Planning and Analysis Cell (PPAC), India’s current refining capacity is close to 220 mtpa, while the demand is at 165 mtpa. IOCL has the most refining capacity at 74 mtpa (including Paradip), while the highest single location capacity of 60 mtpa is owned by Reliance Industries Ltd (RIL) at Jamnagar, Gujarat.
“India is currently surplus in refining capacity and exports more than 50 mtpa of refined products. Coastal refinery projects help in importing crude and exporting products and this planned refinery would strengthen India’s position as a refinery hub,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India.
While Pradhan did not elaborate on what the investment and the equity structure of the new refinery will be, Mishra said mega refineries usually have a capacity of 15-20 mtpa or more with an integrated petrochemical complex and can involve investments in excess of $8-10 billion.
Mishra said many of the refineries in India are age-old and require a lot of investment to maintain efficient operations. It is time to retire some of the refineries and set up news ones with larger capacities, he said.
Both BPCL and HPCL have always cited paucity of land as the reason for their inability to expand the capacities of their refineries. Also, being in the heart of the city, the refineries are seen as a source of pollution.
Pradhan said the OMCs have also been asked to convert all their refineries to meet Euro IV norms by 2017 and carry out the required modifications to meet Euro VI norms by 2020.
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