New Delhi/Mumbai: A wave of shutdowns will hit Indian state-owned refineries next year as the country prepares for Bharat Stage 6 (BS 6) from April 2020, company officials said, in moves that could temporarily dent oil demand and push up imports of refined fuels. India, the world’s third-biggest oil importer and consumer, has surplus refining capacity and rarely imports diesel and petrol.
It also means that demand for fuel produced by India’s privately owned refiners will likely climb during the period, as state refiners seek to fill the gap. State refiners—Indian Oil Corp. (IOC), Bharat Petroleum, Hindustan Petroleum Corp. Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL)—account for about 60% of the country’s nearly 5 million barrels per day (bpd) capacity.
The refiners will have to shut diesel and petrol-making units at their plants for 15 to 45 days to churn out BS 6-compliant fuels from January 2020 to be able to sell them from April of that year.
“Next year will be challenging for us as I have to protect my crude throughput and finish the job at the refineries and get ready for BS 6 by April 2020," said B.V. Rama Gopal, head of refineries at Indian Oil, the country’s top refiner. Indian Oil plans a roughly month-long shutdown of petrol- and diesel-producing units at all of its 11 refineries, he told Reuters. Key parts of the refineries requiring a revamp include naphtha hydro-treaters, catalytic reforming units, isomerization units, diesel sulphurisers and diesel hydro-treaters. In addition, some refiners have to revamp or set up new gasoline treaters, hydrogen production and sulphur recovery units.
India has been gradually reducing sulphur emissions from vehicles since 2000, when fuel sold in the country had 500 parts per million (ppm). Motorists in Delhi, which faces major air pollution, moved in April this year to BS 6 standards, which allow up to 10 ppm sulphur.
HPCL will shut its diesel and petrol units while upgrading the crude units at its Vizag and Mumbai refineries for 30-45 days, its chairman M. K. Surana said. He forecast a slight reduction in the company’s crude intake. “We will take the shutdown in one shot so we don’t have multiple disruptions," Surana said.
Surana and MRPL managing director M. Venkatesh, who intends to shut some refinery units for up to a month, said they see no need to import fuel in 2019 given that state fuel retailers can access robust production at local private refiners.
Their view is challenged by analysts who estimate weaker diesel and petrol prices would prompt state refiners to import auto fuel instead of going to private peers who levy coastal freight charges on top of normal prices. A similar phenomenon was witnessed when India migrated to BS IV fuel in phases to April 2017, said Sri Paravaikkarasu, head of east of Suez oil for consultants FGE in Singapore.
“There is a high possibility that the lengthy shutdown period could result in a shortage of current Euro IV products in the domestic market. In such an event, Indian national oil companies must turn to the international market for product purchases," she said. FGE expects India could import 40,000 bpd of gasoline and 70,000 bpd of diesel for about one quarter in 2019 because of the shutdowns.