We Commissioned our Polypropylene unit in align with 'Make in India' campaign

H Kumar
Managing Director, Mangalore Refinery and Petrochemicals Limited (MRPL)
With the successful commissioning of Phase III expansion and Polypropylene unit, MRPL has improved the Gross Refining Margin (GRM). H Kumar, Managing Director, Mangalore Refinery and Petrochemicals Limited (MRPL), spoke exclusively to Offshore World about the expansion and future plans of MRPL. Excerpts…

How do you evaluate India’s current refining capacity?
India is certainly recognised as one of the emerging refining hubs globally as the sector has itself been established since few decades. With the current refining capacity of almost 215 MMT (4.4 million barrels per day), the footprint of India on the global refining map as a major player is worth taking note of. From a modest refining capacity of 62 MMT in 1998 to current 215 MMT is really a good journey.

The rapid proliferation of refining capacity is not only for the domestic consumption, but we are also able to export a substantial quantity of petroleum products since few years. From 2001, India has been a net exporter of petroleum products; and last year, the country exported almost 63.92 MMT of petroleum products worth of USD 47 billion. This makes us a major player in the refining products exporter in global arena.

Please apprise uson MRPL's last year export portfolio (both the quantity and product list).
In 2014-15, MRPL exported almost 5 MMT petroleum products; include 147.1 TMT of Gasoline (MS), 970.59 TMT of Naphtha, 903.94 TMT of HSD, 1075.23 TMT of Aviation Turbine Fuel (ATF), 1730.58 TMT of Furnace Oil (FO), 10.45 TMT of Mixed Xylene, 119.55 TMT of Vacuum Gas Oil (VGO) and 27.22 TMT of Sulphur .

MRPL supplies the entire fuel requirement of Mauritius and in FY 2014-15, MRPL supplied around 1.1 MMT of petroleum products include HSD, Furnace Oil, Aviation fuel, gasoline, etc.

What are key drivers that make India as net exporter of petroleum products and refining hub?
I would put three valuables for that. One is the proximity of demand sectors for refining products that put the logistic cost low. Similarly, proximity of crude availability from the Western Gulf and West Africa is another advantage. The easy accessibility for both import and export route due to our long costal line is being the key driver for the sector. Conducive policies are also imperative in getting investment into the sector. Low manpower cost in Indian refinery that brings down the operational cost is another key driver for the industry. High Gross Refining Margin (GRM) both from private players as well as public players in last few years is an additional advantage in this direction.

How has the fall in crude oil prices impacted the profit margins of MRPL over the last year?
Contrary to the common belief, falling crude price is not always profitable to refiners like ours. For example; while price came down sharply USD 107 to almost USD 47-48 since January last year, MRPL registered an inventory loss of Rs 2750 crore. Last year, the sharp decline over a period of six months on a monthly average of almost USD 10 per month, MRPL's realisation was affected badly and registered a loss of Rs 1750 crores. But at Q4, we could manage a net profit of around Rs 1170 crores and operating GRM of USD 8.56 /bbl. Generally refiners don't worry of the crude prices. Their main concern is whether the product cracks will able to protect the fluctuation in crude prices (Product crack is the difference between feed stock price and product price). Any refinery will do well if the product cracks are reasonably good .

What are the new projects of MRPL in pipeline?
The government of India has mandated the implementation of BS VI emission norms by 2022. While most of the Indian refiners are moving towards BS IV and targeting to achieve BS VI by 2022, MRPL plans to invest in that direction by adding couple of units to upgrade diesel & petrol qualities. Along with this, MRPL is looking for debottlenecking its existing units where we can expand our refining capacity from current 15 MMT to 18 MMT. While we are planning to complete the fuel quality requirement in a very short time span, we also intend to go for capacity expansion.

For Greenfield capacity expansion, we need extra land and have applied to the Karnataka government for the additional land. Once all the necessities are in place, we will go ahead for debottlenecking and expansion along downstream petrochemicals. In petrochemicals space, today we have successfully commissioned and commercialised our polypropylene unit in MRPL .

At MRPL we produce significant amount of pet coke, which we are currently selling to the cement plants, we are thinking of utilising this pet coke for producing Syn gas through Pet Coke gasification. This Syn gas has various opportunities for making downstream Chemicals, Fertilisers and Petrochemicals. MRPL has increased the stake in ONGC Mangalore Petrochemicals Ltd Aromatic complex to 51 per cent making it a subsidiary and has also sought Board approval from the promoter company for its complete merger with MRPL. The Aromatic complex with an annual capacity of 914 KTPA Para-Xylene and 283 KPTA of Benzene in Mangalore Special Economic Zone will be a value chain integration for MRPL. With this integration we are evaluating growth in petrochemicals like Linear Alkyl Benzene, Benzene based petrochemicals viz; Ethyl Benzene with the availability of Benzene and Kerosene from OMPL and MRPL complex.

What are the future plans of MRPL?
With the successful commissioning of Phase III expansion and polypropylene unit, MRPL has improved the Gross Refining Margin (GRM). Now we are looking at small revamp of our CCR unit which will give us more gasoline production .

The deregulation of HSD pricing has opened up opportunities for recommencing the retail business. MRPL has commissioned its first dealer operated Retail Outlet at Mangalore in Dec, 2014 and is in the process of setting up large number of retail outlets in its refinery zone. We are having license to setup 500 retail outlets and planning to set-up around 100 Retail outlets in the short term.

Please elaborate the future challenges that Indian refinery will face from the Middle East region as the region is gearing up more refineries and expansions. How are you gearing up to address the same?
The biggest challenge is surplus product in the market. As more Refinery expansions and new refineries will be coming up in the Middle East regions, marketing of petroleum products is going to be a challenge in future – both internal and export also. Opening of more retail outlets as mentioned above will be one of our immediate plans for product evacuation to tide over the challenge. At MRPL, we are focusing on more value-added products and the products which are in demand. The pivotal emphasis is on recovering value from low value Hydrocarbons. For example the processes of the Phase-3 units has low value added products, viz; Pet-Coke, off gases generated from PFCCU, MRPL is contemplating the recovery of valuable Ethylene and Butenes from PFCCU off gas and producing downstream petrochemicals.

Another area is bringing in operational efficiency that can bring down the fuel consumption and improve the overall distillate yield. We are according top priority for reducing energy consumption through various energy conservation measures and reduce overall Energy intensity index of the Refinery, are the major areas of focus for the future challenges of Indian Refinery.

Please elaborate more into your statement on Feb'15 that the Polypropylene unit set up with an investment of Rs 1,803 crore, is a fitting response to the Prime Minister's clarion call to 'Make in India' and it will give a competitive edge to India through forex savings and exports.
Today, 40 per cent of the polypropylene in India is imported and the successful commission of the unit at MRPL is certainly a step towards 'Make in India' campaign. Polypropylene has been growing at 6-7 per cent per year almost at the same rate as our GDP forecast. The polypropylene unit at MRPL is the only one of its kind unit in South India to cater almost 5 lakh tonne of polypropylene demand in the southern market. The commercial production from the unit has been started and the product has been well received by the consumers in the market.