IOC units to make cleaner fuel from April

IOC units to make cleaner fuel from April

New Delhi: All the major plants of state-run Indian Oil Corp will start producing superior-grade petrol from April, but its four smaller units would miss that deadline by three months, its head of refineries told Reuters on Monday.

Government plans to introduce Euro IV-compliant fuel in some states from 1 April, 2010, while the rest of the country will switch over to Euro III-compliant fuel.

“All my refineries will be able to make Euro III and Euro IV fuel from 1 April except Bongaigaon, where both petrol and diesel projects are delayed, and at Guwahati, Digboi and Barauni only petrol project is delayed," B.N. Bankapur said.

He said 240,000 barrels per day (bpd) Panipat and 160,000 bpd Mathura refineries in northern India are ready to produce cleaner fuel, while the 274,000 bpd Koyali plant in western Gujarat state and 120,000 bpd Haldia refinery in eastern India should be ready by April.

Completion of cleaner fuel project at IOC’s 47,000 bpd, northeastern Bongaigaon refinery has been delayed to end-June, he added.

“Working environment is not very conducive there for project implementation. Major contractors are not willing to go there and local contractors are not able to do the job," Bankapur said.

Better-grade petrol producing units at Barauni refinery in the eastern Bihar state will be ready by end-March, but commissioning will take three months, he said.

He said project at its Digboi and Guwahati plants in the northeast would be completed by April and commissioned by June.

Volume Dips

Bankapur said his firm’s diesel output would decline after the implementation of projects to improve fuel specification, impacting IOC’s profit margins.

Government partly compensates state-refiners for selling fuel at lower state-set prices, but uncertainity over the extent and time of compensation restricts oil firms’ investment capabilities.

IOC’s head of finance S. V. Narasimhan had said in July that the firm would not be able to support investment due to price controls and would look for investment in new refinery projects from fiscal year 2011/12.

Bankapur also said his firm had examined the option of raising the capacity of its biggest Koyali refinery to upto 360,000 bpd, but “final call will be taken by the board".

“We have two options either to raise it to 16 million tonnes (a year) or 18 million tonnes. It is a low-cost revamp," he said.

The country’s top state-run refiner has slackened its pace in “experimenting with new grades", Bankapur said, as the price differential between light and heavy grades has narrowed.

IOC has tested over three dozen new grades in the past three years.

The front month Brent/Dubai Exchange of Futures for Swaps for January fell into deep discount of between 50 and 75 cents a barrel since the beginning of this month.

“We are not finding much of an incentive to experiment with crude (varieties) ...there is a slowdown we will pick up buying new grades when the differential increases," Bankapur said.