Financial Daily from THE HINDU group of publications
Monday, Jun 17, 2002
Supply Chain Management
Columns - On the move
APM dismantling: Problems in the pipeline
THE dismantling of the administered pricing mechanism (APM) has posed new challenges to pipeline transportation of crude and petroleum products. Earlier, a pipeline project was viewed as a paying proposition thanks to government support. Not any more. The economic liberalisation has made all the difference.
Of all public sector oil marketing and refining companies, Indian Oil Corporation (IOC) perhaps can claim to have the largest network of pipelines for movement of both crude and petroleum products. However, several such networks, particularly in the eastern region, are now hit by poor capacity utilisation, causing concern to the IOC authorities.
For instance, the 500-km long Haldia-Barauni crude pipeline (HBCL). Constructed with investment of nearly Rs 800 crore and an initial throughput of four million tonnes per annum (mtpa), subsequently expanded to 7.5 mtpa at an additional investment of Rs 400 crore, HBCL is now operating much below its capacity. The pipeline was constructed to transport imported crude from Haldia dock to Barauni refinery, whose capacity is proposed to be enhanced to six mtpa from the present 3.2 mtpa or so, and another 1.5 mtpa for the Assam-based Bongaigaon Refinery and Petrochemicals Ltd (BRPL), now under the IOC fold, through the Oil India Ltd's existing pipeline from Barauni. Right now, the throughput level of HBCL is barely 50 per cent of the capacity; worse, there has been no movement of crude for BRPL in the past several months.
Since there is no certainty under the present situation that IOC will go ahead with the proposed capacity expansion of the Barauni refinery, the chances of HBCL achieving a higher utilisation level appears remote, more so when the crude transportation for BRPL has remained suspended.
Side by side, the Haldia-Barauni product pipeline (HBPL) presents a better picture. The throughput of HBPL, at about 1.1 mtpa (2001-02), is lower than the capaicty of 1.25 mtpa, but much higher than the MoU figure of 0.8 mtpa for the year. This is presumably because Barauni and the adjoining areas are largely served by the products transported through HBPL. The output of Barauni refinery, on the other hand, is being carried through the Barauni-Kanpur product pipeline (BKPL) to cater to certain parts of UP and Bihar.
The 668-km long BKPL, also passing through Patna, Mughalsarai and Allahabad, too is suffering from the problem of poor utilisation, mainly because of the low production at the Barauni refinery. Now, in a liberalised regime, importing crude and transporting it through the 500-km long pipeline to the refinery is no longer considered a viable option. What is causing concern is that, meanwhile, the capacity of the BKPL has not only been expanded substantially but the length of the pipeline too has been extended to Lucknow at a substantial investment.
The Haldia-Budge Budge product pipeline (HBBPL) is operating at even less than 50 per cent of its capacity of 1.1 mtpa. IOC's earlier proposals to lay a crude pipeline between Paradip and Haldia and a product pipeline between Paradip and Rourkela too have become uncertain, more so when IOC is still undecided on its refinery project in Orissa.
On the west coast, the future of Vadinar-Kandla Petronet (that is, the 100-km long product pipeline laid jointly by IOC and Petronet India between Jamnagar and Kandla to transport the products of the Reliance refinery to IOC's Kandla-Bhatinda product pipeline) too has become uncertain with IOC planning to convert the 141-km long Viramgam-Koyali section of the 416-km long Salaya-Viramgam-Koyali crude pipeline into a product pipeline. There is a further proposal to convert the existing 1440-km long Kandla-Bhatinda product pipeline not only into a crude pipeline (up to Panipat) but also to extend it at the Kandla end by about 60/70 km to connect Mundra port.
New product pipelines will be laid between Viramgam and Sidhpur initially and later between Sidhpur and Sanganer. Thus, the crude requirement of the Panipat refinery, whose capacity is being expanded from the present six to 12 mtpa, is proposed to be served largely by the import through Mundra and and partly by imports through Vadinar. There will be a new 28-inch diameter crude pipeline between Viramgam and Koyali, with the result the import through Vadinar will meet the entire requirement of Koyali, whose capacity is being expanded substantially, and part requirement of Panipat and Mathura refineries. The impact of all these changes need to be watched.
The fate of Chennai-Trichy-Madurai (CTM) product pipeline too hangs in a limbo. The 500-km long CTM pipeline was originally proposed to be implemented by Petronet CTM, and the joint venture between Petronet India and IOC. Since the project is yet to receive the financial closure, IOC wanted to implement it on its own. It is now learnt that Petronet India is opposed to allowing IOC to go alone in the project. The CTM pipeline is to transport products of Chennai Petroleum Corporation from Chennai to Neyveli, Tiruchi, Madurai and Thanjavur.
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