State-owned Indian Oil Corporation (IOC) is mulling investing $1.87 billion to raise capacity at its Koyali refinery in Gujarat to 18 million tonne.
"The board of IOC is likely to take up shortly the recommendations of an internal team that suggested the company should increase Koyali capacity from 13.7 million tonne to 18 million tonne and not 16 million tonne originally envisaged," a company official said here.
A consultant would be appointed by December to prepare a Detailed Feasibility Report (DFR) for the capacity expansion.
"IOC is working on economic projections for the expansion and analysing future demand scenario besides expected internal rate of return (IRR) from the project," he said.
The expansion may cost $1.87 billion and the project may take 36-40 months to complete.
The official said IOC was identifying how much land was needed for the expansion and has identified potential areas near Bajwa village, adjacent to Koyali.
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Koyali refinery, near Ahmedabad, is the second-largest of the 10 refineries IOC owns. IOC has a total refining capacity of 64.7 million tonne, making it the nation's largest refiner ahead of Reliance Industries whose twin refineries at Jamnagar in Gujarat have a combined capacity of 62 million tonne.
The official said IOC's refining capacity will rise to close to 80 million tonne when its 15 million tonne a year Paradip unit in Orissa is commissioned in the first quarter of 2013.
The company is targeting to sell fuel from the Rs 29,777 crore Paradip refinery in domestic market rather than export as it was earlier thought, due to rise in fuel demand at home.
The refinery was originally planned to export at least 2.05 million tonnes of petrol and 124,000 tonnes of naphtha out of its yearly output of 15 million tonne. But double-digit growth in petrol and diesel consumption had meant that there would be very little left for exports.
Paradip refinery will produce 5.97 million tonnes of diesel, 3.4 million tonnes of petrol, 1.45 million tonnes of kerosene/ATF, 536,000 tonnes of LPG, 124,000 tonnes of naphtha and 335,000 tonnes of sulphur, all of which will be for sale in the domestic market.