IndianOil expects to save Rs 1 crore every day on transportation
New Delhi   26-Mar-2008
India's largest oil refiner, IndianOil, expects to save Rs 1 crore every day, largely on transport costs, once its proposed 15 million tonnes per annum (mtpa) refinery and petrochemicals complex at Paradip in Orissa starts operations in 2011. Waters around Paradip port are deep enough to allow very large crude carriers, or VLCCs, to dock. These will directly feed the refinery. "Until now, the crude gets transported through pipelines to refineries across the country after being received at the shipping terminals. The setting up of this refinery will save both time and money as the VLCCs will be able to berth near the refinery," said a senior IndianOil executive, who did not wish to be identified. A VLCC can transport around 300,000-350,000 tonnes of crude oil in a single journey. IndianOil currently needs 60 million tonnes (mt) of crude oil a year. Of this, around 70%, or 42mt, is imported from countries such as Iraq, Kuwait, Saudi Arabia, Malaysia, Iran and Abu Dhabi. Most of this is imported on VLCCs to achieve economies of scale in transportation. The balance is met from domestic production. The refinery will have a so-called single-point mooring (SPM) at high seas, where the VLCCs will drop anchor; the crude will then be transported through a pipeline to the petrochemical complex. The SPM is expected to cost the company around Rs750 crore. The Paradip petrochemical complex will require an investment of Rs 30,000 crore. IndianOil expects it to meet new fuel emission standards, process more low-quality crude and tap export markets in neighboring countries in South-East Asia. India has a refining capacity of 149mtpa of crude, and IndianOil has a 40% share of the business. Analysts say that the savings will benefit IndianOil, which has a total debt of Rs 28,834 crore on its balance sheet. "This measure will help IndianOil to garner higher Gross Refining Margins (GRMs) as the cost of crude transportation will come down. They may benefit as much as 30 cents (Rs l2.03) per barrel," said Prayesh Jain, an analyst at stock market research firm India Info line Ltd. IndianOil's refining margin was $10.43 per barrel in the third quarter of 2007-08. It ended 2006-07 with Rs 2.20 trillion in revenues and Rs 7,499 crore in net profit. In the first nine months of 2007-08 ended December, it returned a net profit of Rs 7,377 crore on revenues of Rs l.77 trillion.