'Indian petroleum market growth is encouraging'

Mr K Ravi,
Chief Operating Officer, Bharat Oman Refineries Limited
Bharat Oman Refineries Limited (BORL), the joint venture company of Bharat Petroleum Corporation Limited (BPCL) and Oman Oil Company SAOC, Sultanate of Oman (OOC), is augmenting its refining capacity from 6.0 MMTPA to 7.8 MMTPA in next three years. In the backdrop of this development, Mr K Ravi, Chief Operating Officer, Bharat Oman Refineries Limited, elucidated the detail expansion plan in line with the implementation of Euro VI fuel emission standard by 2020 and changing business environment of the Indian refining sector, in an interaction with Rakesh Roy.

Can you please detail about the capacity expansion plan of BORL from existing capacity of 6 MMT to 7.8 MMTPA in next three years?
BORL is augmenting its refining capacity from 6.0 MMTPA to 7.8 MMTPA through low cost refinery debottlenecking project. This will increase the refining capacity by 30 per cent with low capital investment and in line to meet requirement of Auto Fuel Vision & Policy 2025. The project is scheduled to be completed by 2018-19.

How do you evaluate the current Indian refinery sector and its growth drivers?
Indian petroleum market growth is encouraging and all petroleum products have registered growth except Kerosene.

The changing economics of oil and narrowing price gap between diesel and petrol has resulted in a shift again towards petrol driven vehicles. More usage of personal vehicle compared to public transport will boost the demand of transportation fuel. Hence these factors would encourage refining sector .

As crude oil continues its slide, Indian refineries have gained better refining margins. However private refiners score better against their public sector counter parts.
India imports more than 80 per cent of crude requirements from oil producing countries and therefore fluctuations in oil prices are being tracked more closely in the domestic markets. Since mid-2014, global crude price have been halved.

The purchase term agreements for refiners usually last a year with prices fixed every month on the basis of a formula dependent on the average prices in the international market topped by a premium/discount. In 2014- 15, most refiners were saddled with huge inventory losses due to falling prices that hurt their profits. Spot crude purchase gives flexibility in terms of the types of crude a refiner want to purchase, depending on the demand of the products and refinery configuration.
Private refiners procure more crude from spot market based on their refinery configuration and negotiations available at that time. However Indian Government is also looking into setting up a trading desk for PSU’s which will also give them edge.

With the changing business environment, refiners have switched to cheaper crude, especially heavy oil and contain high sulphur to keep higher refining margins. How have Indian refiners, especially BORL, upgraded refining configuration & processing capability of such crudes?
BORL is designed to process 100 percent high sulphur crude processing and some of other refineries are also switching over to process heavier crudes by way of revamp/ modernisation.

Government has proposed to implement Euro VI by 2020 by skipping Euro V altogether. How is BORL gearing up in technology & refinery upgradation and funding to match the emission norms in definite time frame?
Government proposal of direct switch over from Euro IV to Euro VI grade fuel is a great challenge for all refiners.

BORL would be able to supply 100 per cent Euro IV fuel from April 2017. Once the debottlenecking is complete BORL would be able to supply Euro VI fuel .

What are the future challenges that Indian Refineries will face in the coming years while complying with stricter environment, regulatory & fuel emission norms with the demand of middle distillates, etc?
In line with climate change objectives and environmental legislations, every country is to cut down its Carbon Dioxide emissions and make fossil fuels more environment-friendly. The quality of crude oil imports to India - mainly 'sour' - is a challenge as a result of the stringent product quality requirements currently in place.

India is also adopting strict measures to increase the quality of fuels which will make them environment friendly. These measures include phasing out lead, reducing benzene in gasoline, cetane improvement of diesel and sulphur reduction.

This brings a great challenge for all Indian Refiners to meet Stringent Product quality in cost effective manner.

Please brief us future expansion plans of BORL existing units to raise its refining capacity and new units in pipeline?
As indicated above BORL is augmenting expansion project with capacity enhancement from 6 MMTPA to 7.8 MMTPA through low cost debottlenecking project Schedule to complete in 2018-19.