Coastal location ensures petrol, diesel & cooking gas supply to West, South

It is a little over a decade since Kochi Refinery (KRL) entered Bharat Petroleum Corporation’s fold as part of the Government’s drive to restructure the downstream sector.

Being a standalone refiner, it was important for KRL to have a strong marketing partner which would ensure its long-term survival. In its turn, BPCL had a huge retail network which was disproportionate to its rather modest refining capacity. This win-win business model was replicated for IndianOil which got charge of Chennai Petroleum Corporation and Bongaigaon Refinery & Petrochemicals.

At the time of the KRL change-in-ownership, BPCL’s refining capacity was barely 10 million tonnes from its facilities in Mumbai and the 3-mt Numaligarh Refinery that it had acquired from IBP, the marketing oil company. Since then, BPCL has commissioned a six-mt refinery in Bina, Madhya Pradesh, while gradually increasing the capacity of its Mumbai facility to 12 mt.

Yet, KRL remains the most critical mid-term growth engine for BPCL. Not only is its capacity being enhanced to 15.5 mt over the next three years (from the present 9.5 mt), its coastal location will ensure comfortable supplies of petrol, diesel and cooking gas to the west and south. In addition, the product pipeline linking the refinery to Coimbatore will be extended to Bangalore.

All this becomes particularly important given that capacity at Bina is not likely to go beyond nine mt, largely due to issues involving availability of water in MP. This would mean that the product-starved northern region will need an additional supply source. While KRL can help out in the interim, BPCL will eventually have to fast-track its plans for the Allahabad refinery, though this is not likely to happen before 2017.

“Till then, KRL will have a very important role to play for BPCL. It will also be home to the new business base for petrochemicals,” top officials told Business Line. The best part is that the six-mt refinery expansion to 15.5 mt is being done at barely Rs 14,000 crore when a new project with a similar capacity could cost more.

By 2015, BPCL’s total refining capacity will be nearly 40 mt with KRL right on top, followed closely by Mumbai and then Bina at nine mt.

With crude availability still being the biggest challenge for Numaligarh, its capacity is expected to stay unchanged at three mt. By this time, the total refining output will be comfortably balanced with BPCL’s retail network, quite unlike the not-so distant past when KRL was not part of its kitty.

(This article was published on November 15, 2012)
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