New IOC facility in Gujarat

Indian Oil Corporation (IOC) will set up a four-million-barrel storage and crude blending facility at Mundra in Gujarat. This, the company says, is to largely overcome the "handicap" of processing sweet crude.

IOC, with a 54 million-tonne refining capacity, is the biggest refiner in the country but it finds itself at a disadvantage compared with the next biggest refiner, Reliance Industry, which can process a wide variety of crude.

According to IOC executives, the Mundra facility would store 4 million barrels of crude oil and would be commissioned by April next year. The company will blend various varieties of crude there and then transport it to its refineries.

"About 60 per cent of crude oil being used in India is sour crude but the desulphurisation capacity is not sufficient," an IOC executive said. Apart from the flexibility advantage, the capability to handle sour varieties also provides a company with cost-advantage since sweet crude is more expensive.

IOC processes about 35-40 varieties of crude oil. It is upgrading its refineries in order to enable them to handle all types of crude, particularly of the heavy and sour varieties. This will help the company take advantage of flexible crude sourcing and higher gross refinery margins accruing thereon.

The difference in price of sweet and sour crude has risen to as much as $12 a barrel from being a low of few cents some years back. "The unprecedented increase in international prices has seen the differential averaging between $2.5-6.5 a barrel," said the executive, adding that larger the differential more economical it becomes to set up a desulphurisation unit.

New discoveries the world over are in sour grade and even if the crude is sweet, it is heavy.

In India, crude from Bombay High, the main producing field of the country, is sweet but the quality of crude to be produced from Cairn Energy's discovery at Rajasthan is waxy and not as good.

The West Asia region, on which India is dependent for its 60 per cent requirement and will continue to be dependent in the future, mainly produces sour crude. "That is why our refineries need to upgrade though we need to keep room for processing sweet crude as well," said an IOC executive.