Oil companies may go slow on refining capacity

 Against a requirement of around 110 million tonnes, the country has a refining capacity of 116.97 million tonnes. Another 20.1 million tonnes is slated to be added during the Tenth Plan.

 While the average refining margin for 2002-03 came to $4.3 a barrel, it has now come down to $3 a barrel. The margins were around $7 a barrel in the last quarter of 2002-03.

 The demand for petroleum products in the terminal year of the Tenth Plan, or 2006-07, has been scaled down to 111 million tonnes from 124 million tonnes.

 Capacity additions in petroleum refining during the Tenth Plan will come from the three million tonnes expansion project of Chennai Petroleum Corporation Ltd, the 5.1 million tonnes expansion project of Bharat Petroleum Corporation Ltd at its Mumbai refinery, six million tonnes of capacity addition by Indian Oil Corporation at Panipat and another six million tonnes by Reliance at its Jamnagar refinery.

 While earlier the petroleum ministry was of the view that the country should have surplus refining capacity so that value-addition could be done locally and petroleum products could be exported to earn valuable foreign exchange, it is now worried about shrinking refining margins and excess refining capacity the world over.

 Refining margins have been falling all over the world, with the result that some of the refineries at the major refining centres are either running below capacity or are shut because of lack of business.

 The demand for petroleum products climbed 2.2 per cent to around 103.6 million tonnes in 2002-03 over the previous financial year. Based on this, the government estimates that the demand may grow a little over 2 per cent in the Tenth Plan, against the target of 3.7 per cent.

 The demand for petroleum products, which was put at 155 million tonnes in 2006-07 at the time of drafting the Ninth Five-Year Plan (1997-2002), was scaled down to 124 million tonnes at the beginning of the Tenth Plan. It is now estimated at 111 million tonnes in the terminal year of the current Plan period.

 The petroleum ministry