Oil refining firms line up Rs 50,000 cr

State-owned crude oil refining companies are lining up investments to the tune of Rs 50,000 crore to upgrade their refineries, as part of the vision to make the country the "world's refinery hub".

"Increased foreign interest in the refinery sector compels us to upgrade to global standards," an official in the ministry of petroleum and natural gas said.

Indian Oil Corporation (IOC), the country's largest downstream company, has a corpus of Rs 20,000-22,000 crore for upgrading its existing refineries.

The Fortune 500 company will now spend Rs 6,000 crore to upgrade its refinery at Koyali, including the implementation of a delayed coker unit. The company has also lined up Rs 3,000 crore for the 6 million tonne per annum Haldia refinery.

Bharat Petroleum Corporation Ltd (BPCL) would spend Rs 2,000 crore on implementing a delayed coker unit at the 7.5 million tonne per annum Kochi refinery, the company's spokesperson said.

"The primary aim is to reduce residue levels in our refineries and, in the process, increase refinery margins," an industry official said on the condition of anonymity.

The country's state-owned refineries have a residue level of close to 30 per cent of the crude oil processed. This residue is primarily in the form of bitumen, used in making roads.

The ministry of petroleum and natural gas is keen on state refineries upgrading their efficiencies to match international standards, according to which, the residue level is just around 10-15 per cent of the processed crude oil.

IOC, which owns the largest number of refineries (10), including its subsidiaries Chennai Petroleum Corporation and Bongaigaon Refinery and Petrochemicals, has a refinery margin of $3-4 a barrel.

Reliance Industries, which operates the 33 million tonne per annum Jamnagar refinery, recorded a $11 per barrel refinery margin in the October-December 2006 quarter.

The huge refinery margin was the primary driver behind the 57.6 per cent year-on-year rise in the company's net profit in the third quarter.

Refinery margin includes the cost of operating the refinery as well as profits of the refining company and is an indicator of its efficiency.

"We have to meet global standards. The ministry has asked state-owned refiners to reduce their residue levels, and improve efficiencies in high sulphur crude processing," an official in the oil ministry said.