Dutch firm Shell roped in to help refineries

The government has roped in Dutch company Shell Global Solutions International for improving the margins of public sector refineries like Mangalore Refinery and Hindustan Petroleum Corporation Ltd.

The aim is to save them as much as $ 360 million in costs and bring these refineries on a par with their Asia-Pacific counterparts. The programme would seek to improve the bottom line of refineries by $ 0.50 per barrel through focus on operational excellence.

Petroleum ministry officials, refinery executives and Shell GSI executives will meet this week to thrash out the modalities of the programme.

Government sources said the total cost of the "integrated gap reduction programme", which aims at bridging efficiency gaps, would be shared between the beneficiary refineries. Refineries can also take a loan from Oil Industry Development Board and Centre for High Technology for this purpose.

Three refineries have been identified for the first phase of the programme""Chennai Petroleum Corporation Ltd's refinery in Manali, Kochi Refinery Ltd and Visakhapatnam refinery of Hindustan Petroleum Corporation. In the second phase, four more refineries""Bharat Petroleum (Mumbai), Hindustan Petroleum (Mumbai), Indian Oil (Mathura) and Mangalore Refinery ""are proposed to be taken up.

Even though the public sector Indian refineries have a healthy average refining margin of about $5-$ 6 per barrel, private refineries like Reliance are expected to record a much higher margin of $ 10-11 per barrel. The benchmark margin level of Singapore is also higher at $ 8 per barrel.

The Centre for High Technology, under the Ministry of Petroleum and Natural Gas, had appointed Shell GSI for preparing a report on improving the efficiency of public sector refineries.

According to the proposal, Shell GSI would not only provide specialists for assessing the situation in these refineries but also post a site manager during the implementation of the programme.

Shell, in its proposal, said that while the cost of the programme worked out to about $ 18 million for the three refineries in the first phase, the annual benefit that will flow after a few years will be of the order of $90 million annually.