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MUMBAI : A covid-induced shift in fuel consumption pattern is leading Indian refiners to review their refining structures and investment plans, said three officials from oil marketing companies.

Increasing demand for petrol and liquified petroleum gas (LPG) is forcing the refiners to either consider a change in refinery configurations, relook their crude oil mix or find ways to produce more of lighter distillates such as LPG and petrol, the officials said, requesting anonymity.

“How to produce less diesel and more petrol is a challenge staring at us right now. Indian refineries were constructed and designed to produce 45-50% of diesel. Also, demand for LPG is increasing. So, with the changed consumption pattern where petrol and LPG are being preferred, we will have to change our refinery configuration to produce (more of) lighter distillates," said a senior official at an oil marketing company and one of the three people cited above. Oil secretary Tarun Kapoor said on 14 September that the demand and requirement of the economy for petrochemicals will witness a major shift, for which Indian refineries’ configurations will have to be different and new refineries will have to function.

Petrol is emerging as the preferred fuel with a pickup in personal mobility during the pandemic, according to the companies. Petrol sales are racing ahead of diesel, which continues to be the most used fuel in the country, according to August 2021 fuel sales data. Petrol sales grew 13.6% from the year earlier in August to 2.43 million tonnes. This was 4.1% higher than the 2.33 million tonnes sold in August 2019. Sales of diesel in August this year rose 15.9% over the previous year to 4.94 million tonnes. However, this marked a 9.8% decline from August 2019.

“Diesel sales are also staring at a not so bright future with Indian Railways planning to convert its entire fleet of diesel locomotives into electric at less than half the cost of refurbishment of diesel engines. Added to this is the plan of state transport units to convert their entire fleet to run on compressed natural gas (CNG), which is not only cheaper but also environment friendly," the second official said.

Changing refining configuration is an exhaustive exercise for refiners. It begins with commissioning various studies, which can take between six months to a year. Implementing that plan could take a few years more. Altering the configuration would also require large investments.

“Changing refining configuration is a tabletop exercise. One needs to look at multiple variables such as the product slate, suitable crude availability, and the technology available to arrive at what can give one the best value to produce that they believe can sell," the third official said.

An analyst at a domestic brokerage said Indian refineries have always had three times greater capacity to produce diesel than petrol. So, if they want to produce more petrol, they have to reorient their refineries to suppress diesel yield beyond a certain value, the analyst said, adding minor tweaking of refineries would not be a challenge, but any major change would involve significant investment.

Another option for refiners would be to bring in more cracking to middle distillates to make lighter distillates, the officials cited above said. Cracking refers to breaking down large and complex hydrocarbon molecules into smaller and lighter components.

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