Why BPCL cannot relocate its Mumbai refinery

Our Correspondent Mumbai | Updated on March 02, 2011

Mr R K. Singh, Chairman and Managing Director, BPCL. -- Shashi Ashiwal


Bharat Petroleum Corporation's Mumbai refinery is smack in the middle of the city, with residential buildings a stone's throw away. It is not the easiest of times during occasions such as Diwali when firecrackers are all over the place. Yet, BPCL knows that the show will just have to go on.

?Relocating the Mumbai refinery or replicating its business model elsewhere in terms of capacity, access to a port with supporting infrastructure is not going to be that easy. The city needs supply of products which explains why this refinery is so relevant,? Mr R.K. Singh, Chairman and Managing Director of BPCL, told Business Line.

Setting up a new refinery would also require investments upwards of Rs 25,000 crore at a time when the public sector oil companies are literally scrounging for cash. In addition, it is not as if finding 3,000 acres elsewhere is a cakewalk.

Land is the least of the problems as there would be other environment-related issues to contend with. Mumbai Port Trust will also be hit considering that oil is one of its biggest revenue streams.

BPCL's neighbour, Hindustan Petroleum Corporation, was contemplating a total relocation to coastal Maharashtra but has since altered its plan. Its Mumbai refinery will stay while the new project in Ratnagiri will kick off with a lower capacity of nine million tonnes, down from the earlier 15 million tonnes.

?At present, we have no plans to shift out but if the situation becomes difficult, the state government may step in. However, we cannot remove the entire oil infrastructure from Mumbai at one go and put in place another pipeline to meet the growing demand,? Mr Singh said.

Hence, even if push turns to shove in the future, the best way forward would be to shift the refinery in phases while ensuring that there is a parallel start-up of operations in the new location. This is the only way to guarantee that there will be no disruption in supply of products. ?Will all this actually happen? One really cannot say but it is not in our minds for the moment,? the BPCL chief said.

This also explains why HPCL will just have to hang in there as far as its Mumbai operations are concerned. In the first place, its new refinery is not going to be commissioned until after 2015 and, as sources say, a whole lot of things could happen in the interim. ?Land acquisition is a tricky exercise and environment concerns could delay a project forever,? they add.

From BPCL's point of view, the top priority is to be vigilant. ?We have to be extra alert as far as security and safety is concerned and need to win the confidence of the community around us,? Mr Singh said.

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Published on February 22, 2011
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