Indian Oil Minister Dharmendra Pradhan on Monday asked the three state-owned oil refining and marketing companies to look into building a greenfield refinery keeping in mind the International Energy Agency's latest oil demand projections for the country.
Quoting the recently release IEA report on India's product demand growth, Pradhan said refiners needed to plan in advance as it takes anywhere between eight and 10 years for a new refinery to be built.
India's oil demand would rise by 6 million b/d to 10 million b/d by 2040 -- the highest rise projected for any country, IEA said in its recently released India Energy Outlook 2015, adding that the refining sector would find it hard to stay ahead of oil products demand.
India currently has a total refining capacity of 215 million mt/year (4.32 million b/d). Oil product demand stood at 161.5 million mt/year in 2014, making the country an exporter.
"In the New Policies Scenario, the sheer size of India's demand growth and lower domestic crude oil output mean that Indian refinery output is increasingly drawn into the domestic market, and refinery capacity eventually falls behind domestic demand," IEA said.
LOCATION LIKELY IN MAHARASHTRA
Pradhan, who was speaking to reporters at the commissioning of a new crude distillation unit at state-owned Bharat Petroleum Corp. Ltd.'s Mumbai refinery, said he expects work on the new refinery to start in 2017, but gave no further details.
The minister said the refinery could be located in the western coastal state of Maharashtra, which has seen the fastest pace of growth in oil demand since the removal of a local tax a few months ago.
He said land would be identified and the proposed plant could be an integrated refinery and petrochemical plant.
"Refining capacity within Maharashtra, between Hindustan Petroleum Corp. Ltd.'s and BPCL's refineries is 20 million mt/year, and petroleum product consumption in the state is 18 million mt/year," he said.
RAJASTHAN REFINERY
Indian Oil Corp., the country's largest state-owned refiner, has been scouting for a location in the states of Gujarat and Maharashtra to set up a coastal refinery like its recently completed 15 million mt/year Paradip refinery, as most of its existing refineries are land-locked.
HPCL, which has a huge gap between its refining capacity and marketing demand, was also looking at a coastal refinery in Maharashtra, but had to shelve the plan due to problems with land acquisition.
It later opted for a 9 million mt/year refinery in Rajasthan, which has also run into difficulties after the current government decided to review the fiscal concessions granted to the project by the previous one.
Pradhan said that the Rajasthan refinery project would be brought back on track, and that details were being worked out with the Rajasthan state government.
IEA pointed out that after the commissioning of the 300,000 b/d Paradip Refinery in 2015, only few capacity additions are seen until 2020.
Though refinery expansions are expected to continue, new refineries in the Middle East would posed a challenge to Indian refiners in an increasingly competitive products market.
