Chennai Petroleum Corporation Ltd has given up the idea of scrapping its oldest 3 million tonne refinery, it is reliably learnt.

The public sector standalone refinery had earlier planned to scrap the 40-year-old refinery and put up a new, 9 million tonne refinery — to get a net capacity addition of 6 million tonnes.

However, there has been a rethink on that. On Monday, the company's board will consider a proposal to put up a green field refinery with a capacity of 6 million tonnes ( against 9 million tonnes, as initially proposed), and retain the 3 million-tonne unit-I.

Savings

In the bargain, CPCL will save close to Rs 2,500 crore of capital expenditure, although there will not be any change in the net addition to capacity — 6 million tonnes. The company will not need to invest more than Rs 10,000 crore in the project.

For sure, the unit-I would need to be refurbished, but this may not cost more than Rs 500 crore, sources said.

New refinery

The new refinery is to come up at Amulavayil village, about 5 km from CPCL's refinery complex at Manali. CPCL owns sufficient lands at Amulavayil.

Products produced here would be piped down to the tanks in the Manali complex.

Sources say two factors weighed in favour of the new proposal.

First, the unit-I is doing fine, so why scrap a plant that is alright? Second, the rate of return works out better on the lower capital expenditure.

Capacity

When this project is complete, CPCL will have a capacity to handle 18.1 million tonnes of crude.

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