Half a dozen stalled refinery expansion plans come under PMO radar

With national fuel demand rising quickly, core team of officials to look into issues holding up planned refinery projects

Nudged by the Prime Minister’s Office (PMO), the petroleum and natural gas ministry is set to expedite discussions with stakeholders on half a dozen expansion and greenfield development plans of stalled oil refinery projects. These units have been facing roadblocks due to land hurdles, lack of environmental clearances or funds. This move is set to boost domestic crude output and meet the rising demand. 

One of the projects under consideration is the contentious West Coast Refinery in Ratnagiri, Maharashtra.
 

The government will soon form a core team to look into the hurdles, revive talks and bring multiple stakeholders to the discussion table, officials said. This will include officials from the ministry and oil marketing companies (OMCs), among others.

“Even for those projects in the public sector, the executing agency is OMCs, state governments or private participants. The ministry often acts as a bridge, and that is what we will do,” an official said.
 

The government is working to raise the total crude oil refining capacity in the country to 450 MMTPA (million metric tonnes per annum) from the current 250 MMTPA or about 5 million barrels per day (bpd). Meanwhile, fuel demand is expected to double to 10 million bpd by 2050. 
 

India already has the fourth-largest crude refining capacity in the world.
 

However, the rapidly growing domestic demand has made the government prioritise capacity addition.

Fuel consumption reached a 24-year high in February 2023 to 4.82 million bpd. Consequently, the country’s petroleum product consumption may touch a new high of 233.81 million tonnes in 2023-24, according to government estimates.
 

Stalled projects
 

Complex and capital-intensive refinery projects generally have a long gestation period. But a slew of challenges has held up the industry’s growth in India.
 

The largest such project is the planned West Coast Mega Refinery, which is set to come up in the Nanar area of Ratnagiri district.
 

First announced in 2015, the $44-billion project had targeted an unprecedented refinery capacity of 60 MMTPA.

But a lack of cooperation between the then Shiv Sena-controlled Maharashtra government and the BJP-led central government had held up the mega project. In 2018, Saudi Aramco and the UAE’s ADNOC had signed a framework agreement to jointly develop the Ratnagiri refinery. 
 

The foreign partners were to hold a 50 per cent stake in the project, while Indian Oil Corporation (IOC) would have a 25 per cent stake. The remaining 25 per cent would be divided equally between Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL).
 

But delays over acquiring the massive 15,000 acres required for the project had tested the resolve of the parties, sources said.

As of end-2022, while the state government had managed to acquire 2,900 acres, land acquisition hurdles and stiff opposition continue over the rest of the land.
 

“There has been serious thought of breaking up the project into several refineries in different areas. This is because the initial plans now seem too big to be sustainably executed,” an official said.
 

Announced in 2013, India’s largest upcoming integrated refinery and petrochemical project, the Rajasthan Refinery Project (RRP), is also behind schedule.
 

The HPCL Rajasthan Refinery (HRRL), a joint venture between HPCL and the Rajasthan government had also faced severe cost overruns.
 

The initial estimate of the project — coming up near Pachpadra town in Barmer district — was Rs 43,129 crore. And, this has skyrocketed to Rs 72,000 crore. Touted as the single-biggest investment at one location in the country so far, the project had set a new deadline of 2022 in 2018.
 

HRRL had then also stated that the project will be mechanically completed within four years from the last date of receipt of all statutory approvals.
 

A major poll issue in the region, the state government has repeatedly pointed out spiralling cost overruns and delays. It sought the Centre’s help to quickly finish the project.
 

March 2024 remains the tentative deadline for setting up all the refinery units. And, four of the units may reach operational levels in the next three months.
 

The last new PSU refinery to be inaugurated was BPCL's Bina Refinery in Madhya Pradesh, back in May 2011. Initially with a 6 MMTPA capacity, the state-owned OMC subsequently expanded it to 7.8 MMTPA in 2018.
 

A massive Rs 49,000-crore expansion plan has now been outlined for the sprawling plant in the Bundelkhand region. It will raise capacity to 11 MMTPA.
 

Last month, the Madhya Pradesh government gave its approval for the expansion, along with the setting up of a petrochemical project to manufacture by-products. These include aviation turbine fuel, linear low-density polyethylene, bitumen and benzene.