Chennai Petroleum Corporation Ltd, which has shut down nearly a third of its capacity for maintenance, expects to go back fully on stream next month.
The company’s 10.5 million-tonne-a-year, standalone refinery has about 3 million tonnes of refinery capacity down since mid-July. This will go on line in the third week of September, according to Mr A.S. Basu, Managing Director, CPCL.
Addressing media persons, he said he is optimistic that the ban on industrial expansions in the Manali industrial area to the North of Chennai will be lifted soon once the Central Pollution Control Board gets the data on recent surveys of pollution levels in the area.
Better margins
This means CPCL will be able to work on its brownfield expansion project and ‘resid upgradation’ project, which will help it refine low-cost, high-sulphur crude that will give it better margins.
The Rs 3,100-crore upgradation project will improve the refinery’s gross refining margins — the gap between the cost of the crude and total value of the downstream products — as it will increase the proportion of cheap crude it processes. It now handles about 69 per cent of high-sulphur crude and this can be taken up to 82 per cent. Its margin will go up to $2 a barrel of crude from the present $1-2.
On the expansion, which will give it an additional capacity of about 6 million tonnes, Basu said the company will rejig the project to get an optimal product mix in the light of changes in the oil market. There is an excess refinery capacity in the domestic market, with 213 million tonnes a year set up, against a demand of about 148 million tonnes. The company will configure the project appropriately as it will involve investments of over Rs 12,000 crore, he said.
Challenges
Pending statutory clearances, initial work on the upgradation is on, with nearly half the Rs 760-crore capital expenditure outlay for the current year focussed on this project and pipeline expansion from Chennai Port. Also, work on the larger, 42-inch pipeline from Chennai Port to the refinery will be taken up to replace the 30-inch line after the clearances are in place.
Basu said market volatility, foreign exchange shifts and the narrowing margin between crude oil and product prices pose significant challenges for refiners. “These are hard days for oil companies, especially standalone refiners like CPCL,” he said. But the company will work on the optimal product mix and value addition to improve its performance.