The Hindu Business Line : Lower crude supplies may affect Numaligarh Refinery output

NUMALIGARH Refinery Ltd (NRL), which is suffering from low capacity utilisation, is set to end the year with production lower than the targeted 2.2 million tonnes (mt).

The BPCL subsidiary has a capacity to refine three mt of light sweet Assam crude. However, it has never been able to run to full capacity due to paucity of crude oil.

The lower production will come at a time when NRL, like other stand-alone refineries, has experienced a decline in gross refining margins during the second half of the year and is paying Rs 800 per tonne price discount to oil marketing companies.

The trend shows that the company may record a lower profit growth in 2005-06 compared to last year. NRL registered 91 per cent growth in net profit to Rs 409 crore in 2004-05 from Rs 214 crore in 2003-04.

Pressure on profits has further increased due to under-recoveries resulting from NRL's entry into petroleum products retailing this year. The company has set up 18 outlets in the North Eastern region and is expected to end the year with 35 outlets.

Company sources said that NRL needed close to 8,000 tonnes of crude a day to maintain production at the targeted level. However, the company is now supplied with a mere 6,500-7,000 tonnes of Assam crude by ONGC and OIL.

The supply constraint has reached a point where NRL's average crude storage - usually maintained at 15 days' requirement - is not sufficient to run the refinery for a day. "The supply constraint has led us to a situation where the day's supply is directed straight to the refinery," a company official said.

According to sources, in terms of licensed capacity, NRL is eligible to get 42.86 per cent of the total 6 mt crude supply through the Assam pool.

The latter comprises 4.5 mt of Assam crude and 1.5 mt of Ravva crude. "However, NRL is now getting 37 per cent of the total supply. We have already brought this to the notice of the Union Ministry of Petroleum and Natural Gas. Though the Ministry has directed the suppliers to rectify the situation, with effect from October, supplies are yet to be stabilised at the desired level," the sources added.