Kochi: Kochi Refineries will spend around Rs 8 billion ($175.3 million) to set up a crude import facility and upgrade fuel quality to help it compete in the domestic and export markets, say officials.
The company, a subsidiary of Bharat Petroleum Corporation Ltd (BPCL), will spend Rs 5 billion to set up an import facility 20 km off the coast to allow crude carriers (VLCCs) to unload oil.
"Now only very small vessels carrying 60,000 tonnes of crude can come to the Cochin port. With the new investment, we can get crude in VLCCs that can carry 300,000 tonnes (2 million barrels)," says Kochi Refineries finance director Cherian Punnoose.
The project, scheduled to be completed by 2006, will help the company save Rs 1.6 billion a year in freight costs and enable it to export to foreign countries such as Sri Lanka. "We can also use the facility to import crude oil in VLCCs for BPCL or other refineries," he says.
Punnoose says the investment will also enable the company to import crude from Nigeria and Angola to offset an expected shortage of locally produced sweet or low-sulphur crude oil.
The company received 60,000 bpd of sweet crude from Oil and Natural Gas Corporation (ONGC) in the year ended March 2003 but in the current fiscal year, it will get only 48,000 bpd as ONGC is diverting supplies to a recently acquired refining subsidiary.
The 150,000-barrel-per-day refinery is spending another Rs 2.8 billion to upgrade fuel quality to abide by strict emission regulations being introduced in 2005, he says. The coastal refinery, which is close to Sri Lanka, is eyeing the market for transport fuels in the island.
BPCL, which controls Kochi Refinery, is trying to get a slice of the retail market in Sri Lanka, where the state-run Indian Oil Corp (IOC) has already acquired petrol stations and is operating storage tanks.
Punnoose says the company''s refining margin since April, the first month of the fiscal year, was about $3 per barrel, down from $4.2 last year, when soaring prices helped refiners make record profits.
The company also plans to increase its refining capacity by about 30,000 bpd by 2008, officials say. India has 17 refineries that can process 2.3-million bpd. It imports 70 per cent of its crude oil requirement, mostly from the Middle East.