OPEN APP
Home >Industry >Energy >Refineries operate below 90% capacity as diesel demand lags

MUMBAI : Refineries run by both private and state-owned oil marketing companies (OMCs) are operating at 75-85% of their capacities, far lower than the expected 90%, as a recovery in demand for automotive fuels remains patchy.

Though petrol sales in August exceeded pre-covid levels, diesel continued to lag. “We are running approximately at 75% capacity as bitumen sales are down due to the monsoons. Almost 25% of bitumen sales is directly linked to diesel sales," a senior official at an OMC said, requesting anonymity.

Indian Oil Corp. Ltd (IOCL) and Hindustan Petroleum Corp. Ltd (HPCL) declined to comment, while Bharat Petroleum Corp. Ltd (BPCL) said its refineries are operating at 85% due to a planned partial shutdown. Reliance Industries Ltd (RIL) did not respond to queries.

State-run IOCL, BPCL and HPCL comprise 65% of the refining capacity in India. The rest comes from RIL and Nayara Energy.

State-owned refineries operated at 91% of capacity in July and 90% in June. In the year-ago period, they had a run rate of 83% when the country was emerging from a strict nationwide lockdown.

Private refineries posted an average run rate of 90% in July, up from 78% in July 2020 but lower than 95% in June. RIL’s domestic unit operated at 98% in July, compared with 101% a year ago, and 99% in June. Its export-focused refinery ran at 76% in July compared with 49% last year, and 87% in June. RIL’s combined run rate was at 87% in July compared with 74% a year earlier, and 95% in June.

Rosneft-owned Nayara recorded a 99% run rate in July, against 92% in the year-ago, and 100% in June.

IOCL chairman Shrikant Madhav Vaidya said on 27 August that India’s diesel demand is expected to reach pre-covid levels by Diwali. IOCL is India’s largest refiner with a 32% market share.

“In the first quarter of this fiscal year, Indian Oil achieved a refinery run of 88.6% as compared to 68.5% in quarter 1 of FY21. As I say this, the sales volume of petrol has already crossed pre-covid levels, with diesel likely to reach there in 2-3 months, say, by Diwali," he said.

State-run fuel retailers sold 2.43 million tonnes of petrol in August, up 13.6% from the year-ago period. It was just 4.1% higher than pre-covid petrol sales of 2.33 million tonnes in August 2019. Diesel sales, the mainstay for refining companies, rose 15.9% from the year earlierto 4.94 million tonnes in August, but fell 9.8% from August 2019.

According to S&P Global Platts Analytics, some Indian refiners are already planning to lift run rates to their full capacities for the rest of the year.

“Demand for gasoline hit pre-covid levels and there are growing expectations that diesel demand will be at that level soon, though the outlook for jet fuel remains subdued... although the country is seeing a resurgence of the coronavirus in some pockets, it’s not deep enough yet to make a large dent to the overall demand," said Platts Analytics.

India’s quarter-on-quarter oil demand is expected to rise by 185,000 barrels in the December quarter , and by 525,000 barrels per day in the March quarter, driven by a more broad-based pick-up in activity as the national vaccination programme picks up pace, according to Platts Analytics.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout