New Delhi: “India’s liquefied petroleum gas (LPG) imports are set to rise by 30% next year, much less than expected after Reliance Industries pledged more supplies,” government and industry officials said.
LPG sales in Asia’s third-largest oil consumer are projected to grow by more than 8% to around 13 million tonnes next year, as more households will be given cooking gas, which along with kerosene and transport fuels is subsidised to control inflation.
With Reliance’s massive new 580,000 barrels per day (bpd) refinery capable of transforming most of its LPG production into high-quality gasoline compontents for export, industry officials feared they would have to satisfy higher demand with imports.
But they now say that Reliance, which is due to commission the new plant within weeks, has pledged to more than treble the amount of LPG it initially offered for domestic sales, easing fears that state refiners would scramble for imports.
“Reliance has recently said they will give us improved quantity than what was earlier promised, so our imports will also be less then what we had estimated,” G. C. Daga, director of marketing at Indian Oil Corp (IOC) said, not elaborating on the likely volumes for next year.
Reliance is now expected to supply 2.75 million tonnes of LPG next year, much higher than its earlier offer of 820,000 tonnes, reducing the country’s likely imports to about 3.7 million tonnes versus earlier estimates of 5.0 million tonnes.
“They had earlier said they will produce less LPG and more gasoline to export. But it seems there is a change in their strategy so they have offered us more volumes,” said an oil ministry official who declined to be named.
A Reliance spokesman declined to comment on the reasons for the increased volumes of LPG offered to the state refiners compared with initial estimates.
An official at IOC said that Reliance was asking buyers to pay higher freight costs for coastal shipments, which threaten to make its LPG cargoes more coastly than imports from key suppliers such as Malaysia, Kuwait, Oman and Bahrain.
“We have limited our demand from Reliance to about 2.55 million tonnes for the next year,” said an official from IOC, which negotiates with domestic suppliers on behalf of all state refiners.
“Reliance was asking for high freight because they wanted to discourage coastal shipments to avoid jetty congestion after commissioning the new refinery,” said the oil ministry official.
Reliance’s existing and upcoming refineries are export-focused, enabling the firm to get tax benefits.
But the federal government bars LPG exports to ensure uninterrupted supplies of the commodity at subsidised rates to the domestic consumers.
Reliance’s new plant is the first in the country to have an alkylation unit that will process butane to produce alkylates with high octane number used for producing superior quality gasoline to tap US and European markets. The refiner plans to put in place 85,000 bpd alkylation unit.
The IOC official said that another private refiner Essar Oil is expected to supply 28% more LPG in 2009 at 660,000 tonnes, while state-refiners’ output is expected to remain at current level of 6.15 million tonnes.