Refiners hike capacity utilisation

Indian refineries are feeding a growing domestic market, and a high-margin international market, by increasing capacity utilisation, as new refinery capacity is only slated to come up in 2008.

Domestic demand during the April-October period has gone up by 4 per cent while export of petroleum products during the period was up by 23.5 per cent. This growth in demand has ended the slack in refinery capacity utilisation, which is now touching 110 per cent in some cases.

"The growth in exports is primarily due to Reliance Industries getting export-oriented status for its 33-million tonne refinery in Gujarat. Also, Essar Oil's refinery at Vadinar has started exporting 90 per cent of its products," said an analyst with a leading advisory firm.

Export of petroleum products is the largest foreign exchange earner for the country. It brought in more than $11 billion in the first six months (April-September) of the current financial year against the $9.1 billion foreign exchange earned during the entire last financial year.

"We expect export revenues from petroleum products to reach $20 billion this financial year," an oil ministry official said.

Except for the Essar refinery, which is running at a capacity of 7.5 million tonne (mt) compared with its designed capacity of 10.5 mt, and the refineries in the north-east, all other refineries are utilising more than their installed capacities.

"This is also helping meet the growing domestic demand," a senior official in the petroleum ministry said.

The country's current installed refinery capacity is 149 million tonnes per annum (mtpa) which is set to increase to 241 mtpa by 2012. Other than 15 mtpa capacity from Hindustan Petroleum's new refinery at Bathinda and Bharat Petroleum's Bina refinery, the rest of the capacity would be export oriented. In fact, export of petroleum products is expected to keep growing at over 30 per cent in the near-term.

Essar will start utilising its full refinery capacity in the beginning of January which will increase the volumes of export.

Reliance is also set to commission a new 29-mt refinery in Gujarat late next year. Besides other refineries in the public sector are being set up by Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL). Most of these refineries are in coastal areas in Orissa and Andhra Pradesh.

"Refineries coming up in Madhya Pradesh and Punjab will help cater to the growth in local demand. Exports will continue to be strong ," said a senior IOC official.

Domestic demand for petroleum products is also expected to rise at a rate of 7-8 per cent per annum. "Domestic demand will grow but will also stabilise at some time. With surplus refinery capacity and capacity addition outstripping demand for petroleum products will ensure that export keeps growing both in value and volume terms," a Mumbai-based analyst said.