Expansion will boost entrepreneurial opportunities

Prasad K Panicker
Executive Director
Kochi Refinery - BPCL
The surge in demand of petroleum products in the country is pushing refiners to augment their refining capacities. Kochi Refinery BPCL, which is expanding its capacity from current capacity of 30.5 MMTPA to 36.5 MMTPA, will satiate growing energy needs in the Indian market. Prasad K Panicker, Executive Director, Kochi Refinery - BPCL, speaks exclusively to Offshore World and provides insights into the modernisation of existing units, upgrading of residue streams to produce value added products to the company's basket and the proposed petrochemical complex. He says that production of petrochemical derivatives of propylene will open multitude of entrepreneurial opportunities for investors to set up downstream units to produce petrochemical products.

What kind of production is BPCL targeting through proposed integrated refinery expansion project (IREP) at Kochi refinery?

There are manifold applications. The demand of petroleum products in the country is growing at a healthy rate, which is encouraging refiners to increase their refining capacities. The integrated refinery expansion project (IREP) of BPCL, which is being implemented at Kochi, is an effort to meet the country's growing energy needs and making auto fuels more environment-friendly.

Present refining capacity of BPCL is 30.5 MMTPA. Post implementation of IREP , the refining capacity would be 36.5 MMTPA, which is about an increase of 20 percent in refining capacity. An additional 5.3 MMTPA of petroleum products will be available in the market after the expansion.

The estimated cost of the IREP is Rs 14, 225 crore. The project is targeted to be completed by December 2015. The project envisages increasing the current Kochi refining capacity by 6 MMTPA from the present 9.5 MMTPA to 15 .5 MMTPA and producing propylene as the feedstock for BPCL's proposed petrochemical complex. We are modernising the refinery to produce auto fuels complying with Euro –IV & Euro V specifications and upgrading the residue stream from the refinery to value-added products to minimise heavy stream generation from the refinery.

The capacity expansion of the proposed IREP by 6 MMTPA will be facilitated with installation of a new state-of-the-art energy efficient Crude Distillation Unit (CDU), which will replace the existing 4.5 MMTPA CDU-1, is now quiet old and energy inefficient. This will result in substantial energy savings and reducing energy footprint.

We have also envisaged associated process units like Delayed Coker Unit (DCU ), Fluid Catalytic Cracker Unit (FCCU), VGO Hydro-treater (VGO HDT), Diesel Hydrotreater (DHDT) Sulfur Recovery Unit (SRU) and Hydrogen Generation Unit (HGU), etc along with matching utilities and off-site facilities as part of the IREP expansion at Kochi refinery.

Tell us about the proposed plan of Rs 6000 crore to venture into the downstream petrochemical business with the propylene supplies from the proposed expansion?
As a value addition, we have envisaged propylene-based petrochemical unit through joint venture, and are currently in talks with some major petrochemical companies to partner for technology and marketing expertise. Propylene, a petrochemical building block produced directly from the refining facility, will be used as the petrochemical feedstock to produce niche petrochemical products like Acrylic acid, Acrylates, Super Absorbent Polymer (SAP), Oxo-alcohol etc. The petrochemical unit will be implanted in tandem with the refinery expansion project.

What kind of opportunities will the expansion of Kochi refinery offer for the further downstream industry in Kerala and other Southern part of the country?
Once the project is implemented, the products available for the market include Propylene, Naphtha, Motor Spirit (MS), Liquified Petroleum Gas (LPG ), Superior Kerosene Oil (SKO), High Speed Diesel (HSD), Air Turbine Fuel (ATF), Furnace Oil/Low Sulphur Heavy Stock (FO/LSHS) fuel oil, Bitumen, Sulphur, and Petcoke. Further, Kochi refinery will commence production of 1 .3 MMTPA petcoke - a new product that will be offered as well. Petcoke can be used as fuel for the cement plants located in Andhra Pradesh and Tamil Nadu, and other than that there is also a possibility of setting up petcoke based power plant.

The cost of power generation is comparable with coal and cheaper as compared with the power generated from other thermal sources such as naphtha. As instructed by the Government of Kerala, the teams of Kerala State Electricity Board (KSEB) and BPCL have carried out a joint study to prepare a Preliminary Feasibility Report for the proposal of setting up a Petcoke -based 500 MW capacity power plant in Kochi.

Additional sulfur production will benefit Kerala based industries like the Fertilisers & Chemicals Travancore Ltd (FACT) and Travancore Titanium Products Ltd.

Production of petrochemical derivatives of propylene and products like Acr ylic acid, Acrylates, N-butanol etc will open multitude of entrepreneurial opportunities for investors to set up downstream units to produce petrochemical products.

Which are the key markets earmarked for production and how do you plan to move the increase in production from the refinery to the users (India & overseas)?
There is a healthy demand of petroleum products in the country; however, we are targeting the Southern part of the country, mainly Kerala, Tamil Nadu and parts of Andhra Pradesh. We will supply the products par tly to other major demand centers either in the Western and the Eastern regions as well .

Additional products produced post IREP would be moved through rail, road and pipelines to the demand centres, and naphtha would be exported through tankers. Presently, there is a pipeline connectivity from Kochi to Coimbatore and Karur, which we intend to extending up to Bangalore.

Have you received clearances for the proposed Kochi Coimbatore LPG pipeline for transferring additional LPG and also extension to Devangonthi ?
There is a proposal to lay a LPG pipeline from Kochi to Coimbatore to transport additional LPG post implementation of planned IREP. The proposal is submitted to the Petroleum & Natural Gas Regulatory Board (PNGRB) for approval. We will get into action once we receive the necessary clearance from PNGRB.

As far as extension of Kochi Coimbatore POL pipeline is concerned, the line will be extended to Devangonthi, which is near to Bangalore. The proposed pipeline also needs clearance from PNGRB and the bidding process is going on . The bid will be opened by January 2014.

How are you handling the subsidies imposed by the Government on the oil marketing companies?
Subsidies are provided to compensate the under recoveries when retail products are sold to the customers. Refinery gets Refinery Transfer Price (RTP), which is calculated based on the international product prices.

How has the depreciation of rupee against dollar by almost 44 percent in the last two years impacted Gross Refining Margins (GRM) of Kochi refinery?
It is true that of late, the continuous rupee decline against international currency impacted the raw material cost and has increased substantially. But the GRM of our refinery has seen a marginal impact, which is primarily due to corresponding increase in product prices globally. However, the retail selling prices of some of the major petroleum products are capped and thus affected the market margins and the profitability of the company on the whole.