REUTERS SUMMIT - BPCL plans to spend $6.8 billion on refinery expansion by 2022

Source : REUTERS
Last Updated: Thu, Oct 13, 2016 11:42 hrs
A worker rides a bicycle at Bharat Petroleum Corporation Ltd. refinery in Mumbai

By Nidhi Verma

NEW DELHI (Reuters) - Bharat Petroleum Corp Ltd plans to spend $6.75 billion through 2022 to raise refining capacity by 62 percent to meet rising fuel demand in the world's fastest growing major economy, a company official said.

India is replacing China as the driver of global oil demand growth as its economy expands and a rising middle class buys motor vehicles. The International Energy Agency expects India to account for a quarter of global energy use by 2040.

BPCL, the country's second-biggest state refiner, aims to lift its crude processing capacity to 1.18 million barrels per day (bpd) by 2022 from the current 730,000 bpd, its head of refineries R. Ramachandran told Reuters on Wednesday.

In the fiscal year to March 2016, Indian fuel demand rose to its highest level in at least 15 years partly because of the nation's renewed manufacturing push under Prime Minister Narendra Modi's 'Make In India' drive.

"We are aiming for an economic growth rate of 7 to 8 percent so if that happens, Indian fuel demand is bound to grow. We will see a (fuel demand) growth rate which will continue to remain at 6 to 7 percent at least for the next 10 to 15 years," Ramachandran said.

About half of the planned refinery expansion spending will be used to raise the capacity of the Bina plant in central India to 320,000 bpd from 120,000 bpd.

BPCL, which operates Bina in a tie-up with Oman Oil Co., will initially expand the capacity to 156,000 bpd by mid-2018, Ramachandran said, adding the overall expansion could cost 200 to 250 billion rupees ($3 billion to $3.75 billion).

The refiner intends to spend about 100 billion rupees to expand its coastal plants at Kochi in southern India and Mumbai in the west.

The company is currently raising the capacity of its Kochi plant by 63 percent to 310,000 bpd and plans to expand the plant to 400,000 bpd by 2022, Ramachandran said.

"Mechanical completion is in-progress and final touches need to be given to some units. From next fiscal we will operate it at full capacity (of 310,000 bpd) on sustained basis," he said.

The Mumbai refinery expansion faces limitations because of high population density and land constraints.

By 2022, BPCL will raise the Mumbai capacity by about 17 percent to 280,000 bpd, he said.

BPCL also intends to triple the capacity at its Numaligarh plant in northeastern Assam state from 60,000 bpd currently, he said. The company would invest about 150 billion rupees, drawn by the potential to export to neighbouring countries.

"Besides meeting local demand the refinery is positioned to also supply products from the plant to Myanmar, Bangladesh and Nepal," Ramachandran said.

However, the expansion hinges on the continuation of the federal tax incentives, he said.

India gives some tax relief to refineries in the northeast to make them profitable as the fuel demand in the region is very low.

($1 = 66.5919 Indian rupees)

(Reporting by Nidhi Verma; Editing by Christian Schmollinger)

More from Sify: