IndianOil looking to expand Panipat refinery capacity by 6 mt
New Delhi   16-Feb-2013

With refining margins on the rise, IndianOil is looking forward to six-million-tonnes capacity expansion of its Panipat Refinery as early as in April, according to sources.

Early assessments suggest, the project may cost nearly Rs 6,000 crore. A proposal in this regard may be put up for board approval in the first quarter of the next fiscal.

Officially though, IndianOil maintains that it is weighing proposals to expand the 15-million-tonne Panipat refinery by 3-6 mt and the analysis will take a couple of months to be complete. Refining margins or the difference between international prices of crude oil and product prices determine the profitability of a refinery.

With a global rise in product prices, especially that of petrol, margins started improving from the beginning of last quarter. IndianOil, controlling majority of the refined products market in India, extracted a margin of nearly $6 on every barrel of crude refined by it in October-December. “We are expecting margins to improve further in January-March quarter,” a company official told Business Line. A good part of the margin boost will come through use of crude inventories (normally of a month) acquired at a cheaper price.

Since state-owned companies assess viability of projects against a benchmark 12 per cent rate of return, rising refining margin improves scope of board approval to the capacity expansion proposals. According to sources, the company’s petrochemicals facility at Panipat is also witnessing improvement in margins beginning the last quarter.

Haldia Petrochemicals

Though there is no plan yet to expand petrochemicals capacity at Panipat, IOC has already announced its interest in ailing Haldia Petrochemicals (HPL).

“With our refinery located next door, we (IndianOil) have a strategic interest in HPL,” the IOC official said adding that the company would participate in the proposed stake-sell programme of West Bengal Government. IndianOil currently has a minority interest in the project.

A senior West Bengal government, however, feels that the legal tangle involving HPL may deter public sector companies to bid aggressively for HPL. The advantage, he feels, goes to prospective bidders from the private sector who may settle issues with the existing lead private promoter (of HPL), The Chatterjee Group (TCG), outside the court.

Nagarjuna refinery

Meanwhile, the company is still evaluating a proposal to acquire controlling stake in the upcoming 6 mt refinery of Nagarjuna Oil Corporation Ltd at Cuddalore in Tamil Nadu. The project has missed many deadlines and is now expected to be commissioned in 2014.

“The due diligence is still on. It will take a couple of months more to be over,” a company source said.