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C.J. Punnathara

Kochi , Dec. 17

KOCHI Refineries Ltd (KRL) has embarked upon a refinery modernisation and expansion programme, which will eventually increase the refining capacity to 10 million tonnes per annum and ensure that its fuel products conform to the BS II norms by 2005.

The company had signed a project management consultancy contract with Engineers India Ltd for implementing first phase of the project last month, Mr B.K. Menon, Managing Director, told Business Line.

The modernisation/capacity expansion project is divided into two phases, with the Rs 273-crore Phase I programme already under way to ensure that fuels such as petrol and diesel conform to the BS II quality norms by 2005.

"Though the mandated deadline for meeting the BS II norms is April 2005, we should have completed the project by December 2004 and the products should be available at the outlets by January 2005," Mr Menon said.

The project will not be contracted out in one lumpsum, but would be undertaken through a number of individual contractual bids. Though the project is expected to entail substantial additional investment, it is not likely to add on to the revenue stream of the company.

To offset the increased investment, Kochi Refineries plans to install a single buoy mooring off the Kochi Port. This would ensure that large-sized world-class vessels would be able to call and ensure substantial savings in the shipping, freight and transport cost for moving crude to the refinery. The project would be completed within 24 months from the implementation date.

The second phase of the project involves creating additional capacity of 2.5 m.t. and modernisation of the refinery to ensure compliance with the Euro II guidelines for fuels such as petrol and diesel. Currently, Phase II of the project is slated to commence some time in 2005.

The current deadline for complying with the Euro II norm guidelines is April 2010. The preliminary estimate for the project is expected to be of the order of Rs 1,600 crore. Independent studies have shown that demand for petroleum products in the region is expected to increase only towards the end of the current decade.

Both the phases are likely to be funded partly from internal accruals and reserves and the remaining from loans from banks and financial institutions. "We have a very favourable debt equity ratio and several banks and institutions have come forward and shown interest in funding the project,'' Mr Menon said.

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