The Hindu Business Line : IOC revives Paradip project

WITH an improvement in the financial outlook, Indian Oil Corporation (IOC) has revived its proposed 15-million-tonne Paradip refinery-cum-petrochemicals project.

The jinxed project, which had been postponed and changed in last eight years, was once again put on hold in the middle of this year when oil prices were soaring and IOC registered its first ever loss in the first quarter of 2005-06.

"The detailed feasibility report (DFR) of the project is ready and we will place it for approval of the board of directors latest by December," the Chairman of IOC, Mr Sarthak Behuria, told Business Line when asked whether the company would revive the project in view of improving financial outlook of the company.

"We had never shelved it. As crude prices were soaring high and our bottomline was hit like never before due to mounting under-recoveries, we were forced to review our investment decisions.

"With softening of crude prices and positive contributions from sale of petrol and diesel, we are now gearing up to take it ahead," he said.

Project plan: Though the IOC board had allowed the company to go for an integrated 15-mt refinery-cum-petrochemicals complex involving an investment of Rs 20,700 crore in 2004, according to the latest scheme of things the company will not go for a full-fledged petrochemicals project in the initial stage.

The DFR, which is now subject to the scrutiny of the project evaluation committee, proposes commissioning of the 15-mt a year refinery using fluid catalytic cracking route. This will enable production of polypropylene and polystyrene along with the regular refinery products requiring an estimated investment of close to Rs 15,000 crore.

In the second phase IOC plans to set up a naphtha cracker plant to produce a wider range of products including mono ethylene glycol.

Euro-IV refinery: Slated to be the most modern Euro-IV refinery with nil residue production, Paradip will hold several distinctions. It will be the first port-based refinery from the company.

Accordingly half of the refining capacity of Paradip may be used for exports in the Asia-Pacific region.

What is more important is that Paradip is likely to generate the best refining margin in the company. The refinery will be using only cheaper heavy crude imported primarily from the West Asia.

Also, as the single point mooring facility will be operational by March 2006, the crude transportation cost will be the lowest here.

9 years in the making

FIRST mooted in 1996, the Paradip port-based refinery has gone through many twists and turns. The project cost and configuration have changed several times in last nine years.

Initially proposed to be a merely six million tonnes (mt) grassroots refinery with an estimated cost of Rs 8,000 crore, the refinery was scaled up to nine mt, 12 mt and finally 15 mt in 2004.

The reasons behind the delay were prolonged negotiations, which ran into years with the State Government for maximum fiscal concessions and the market outlook. As a matter of routine, the project used to be put on hold when the market was on a downturn and when the prospects brightened, seemingly unending discussions among the company, the Centre and the State Government began on fiscal benefits.

IOC makeover: While the project is yet to reach a definitive stage, the last nine years have witnessed the firming up of many trends. This apart, Indian Oil Corporation is also poised to have a makeover from a mere marketing outfit to an integrated oil company to safeguard its interests from crude oil price fluctuations.

The company had recently drawn up a $5.7-billion petrochemicals master plan, which would include world-scale petrochemical hubs at Panipat in Haryana and Paradip. This is part of IOC's total investment plan to grown into $60-billion company by 2011-12 from the $35-billion set-up it is today.

The overall demand for petroleum products will be reaching 270 mt in 2025 from 112 mt today. Paradip, being a port-based project, can contribute significantly because it will be able to tap both the overseas and domestic markets. This is the model pursued by Reliance.

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