The company is looking at diversification into petrochemicals by building a niche speciality chemical project at a cost of Rs 5,000-6,000 crore at Kochi, and plans to rope in a multinational partner for the project, BPCL Chairman and Managing Director R K Singh said.

“We are expanding Kochi refinery from 9.5 million million tonne per year to 15 million tons a year,” he said on the sidelines of the 3rd India Africa Hydrocarbon Conference here. From the expansion, BPCL is looking at manufacturing some propylene derivatives, which are currently imported and not manufactured in the country, Singh said.

The petrochemical project would use feedstock from the expanded refinery and the projects are likely to be completed in the next five years. “While the refinery expansion will be funded by BPCL, for petrochemical plant we are looking for a foreign partner preferably a licensor of the speciality chemical we intend to manufacture,” he said.

Besides the Kochi refinery expansion, BPCL plans to add capacity at the new joint venture grassroots refinery it commissioned this year in Bina in Madhya Pradesh and also add capacity at its Mumbai refinery. Singh said the Bina refinery is proposed to be expanded by 3 million tonne, to 9 million tonne a year.

BPCL’s 12 million tonne Mumbai refinery would add 2-3 million tonne per annum through yield optimisation and operational efficiencies. Bina refinery, which was inaugurated in May, is expected to stabilise by year-end.

Besides Mumbai, Kochi and Bina refinery, BPCL also operates 3 million tonne Numaligarh Refinery in Assam.
Agencies

The Barquentine-3 appraisal well on the Area-1 in Rovuma basin off Mozambique encountered more than 202 net metres of natural gas pay, the companies said in identical statements. “This significantly expands the estimated recovery resource range to 15 to 30-plus tcf of natural gas,” they said.

Barquentinue-3 is the sixth successful well in the block that includes the Windjammer, Lagosta, Barquentine and Camarao discoveries. The Barquentine-3 appraisal well, which was drilled to a total depth of 4,084-km in water depths of 1,575 metres, is located 4.4-km southeast of the Barquentine discovery.

“The operator (US-based Anadarko Petroleum Corp) also informed that the recoverable resources of this size and quality are suited for a large-scale LNG development, which is currently being designed for at least two trains with the flexibility to expand to six trains,” the statements said.

“The pre-FEED (front-end engineering and design) activity for the LNG development is nearing completion and FEED work is expected to bring in the near future,” the statements said.

Bharat PetroResources, a wholly-owned subsidiary of BPCL, and Videocon Hydrocarbon Holdings, a wholly-owned subsidiary of Videocon Industries, hold 10% stake each in Area-1.

Anadarko, which holds 36.5% interest in the block, plans to put up plants to liquify the gas (liquefied natural gas or LNG) so that it can be shipped to consumption centres in cyrogenic ships. The two LNG trains will have a capacity to produce 5 million tonnes of liquid fuel each.

The reserves are more than 11 tcf of resource in Reliance Industries’ eastern offshore KG-D6 fields. Reliance had last year produced over 61 million standard cubic meters per day from its KG-D6 gas discoveries before technical problems led to drop in output. The output is enough to produce about 15 million tonnes of LNG per annum.

Anadarko, which is moving Belford Dolphin drilling rig to Barquentine-4 appraisal well site, is mobilising a second deepwater drillship, Deepwater Milenium, to accelerate the campaign comprising an extensive reservoir testing programme.

Cove Energy Mozambique Rovuma Offshore holds 8.5% interest in the block and Mitsui E&P Miozambique another 20%. The balance 15% is with Empressa Nacional de Hidrocarbonetos (EIH), the national oil company of Mozambique.
Agencies

A tax holiday is currently available to units that are commissioned by March 31, 2012, under section 80IB(9) of the I-T Act (exemption from payment of tax on income earned from refining).

IOC’s 15 million tonne a year Paradip refinery is running behind schedule because of several problems the company has faced in executing the mammoth project in Orissa, officials said.

The biggest of these were law and order problems and issues related to land acquisition, which have delayed the project commissioning to September, 2013, from the previous schedule of the first quarter of 2012.

Officials said owing to issues beyond its control, IOC had asked the Oil Ministry to seek a two-year extension of the tax holiday till March, 2014. The Oil Ministry, in turn, has written to the Finance Ministry requesting the same.

Currently, refineries commissioned after March 31, 2012, will not be eligible for exemption from payment of income tax on revenues earned in the first seven years of operations. The seven-year income tax holiday for the refining sector ends next year.

IOC plans to sell fuel produced at the Paradip unit in the domestic market, rather than export the products as was earlier planned, due to the rise in fuel demand at home.

The refinery was originally planned to export at least 2.05 million tonne of petrol and 124,000 tonne of naphtha out of its yearly output of 15 million tonne. But double-digit growth in petrol and diesel consumption meant there would be very little left for exports.

The Paradip refinery will produce 5.97 MT of diesel, 3.4 million tonne of petrol, 1.45 million tonne of kerosene/ATF, 536,000 tonne of LPG, 124,000 tonne of naphtha and 335,000 tonne of sulphur, all of which will be for sale in the domestic market.

Some of the 200,000-tonne propylene output of the plant may be exported, the company had earlier said. IOC had previously stated that the refinery will start producing fuel by March, 2012, when it will commission primary units like the Crude Distillation Unit. Secondary units will be commissioned by July, 2012, and operations stabilised by November, 2012.

The Paradip refinery is being configured to process the toughest, heaviest and dirtiest crudes, which are cheaper than the cleaner and more easily processed varieties. The refinery will have a Nelson Complexity Index of 13, the highest in the world.
Agencies

“We have taken up drilling of wells in India, Mozambique, Brazil, Australia and Indonesia and consider them to be highly prospective areas. We expect to drill as many as 16 wells by the end of this fiscal and find further discoveries in these blocks,” BPRL Chairman RK Singh said.

 “Our entry into the upstream exploration and production sector in 2006 was the first step in BPCL’s attempt to become an integrated oil company,” Singh added. The company today has 27 blocks, out of which nine which acquired by the company under different rounds of the New Exploration Licencing Policy (NELP) are located within the country and 18 are abroad, spanning six countries.

With 27 exploration blocks spread over seven countries, the strategy going forward will be to consolidate their position in these blocks and basins, he said. Efforts will also be made to augment the company’s portfolio of acreages, Singh added.

In 2010-11, the company made discoveries in Brazil, Mozambique and Indonesia. It has also discovered natural gas in four of six wells drilled in Mozambique, besides light hydrocarbons in offshore Brazil and oil and gas in Indonesia.

“Work on the exploration phase is also progressing in the domestic blocks where BPRL holds a stake. The company has also bid in partnership with other oil companies for blocks offered under the NELP-IX round and the consortia led by BPRL has been shortlisted for three blocks,” Singh said.

Besides India, BPRL holds blocks in Australia, Brazil, East Timor, Indonesia, Mozambique and Britain. BPRL’s total acreage in all these blocks is around 81,000 sq km, of which around 90 per cent are offshore acreages. These blocks are in various stages of exploration.

With the seven recent discoveries in Brazil, Mozambique and Indonesia, BPRL is now poised to guarantee returns to its parent BPCL in the short-term, as well as meet its larger goal of ensuring energy security for the country in the long-term, he said.

The idea behind the formation of BPRL, which has been participating in bidding in oil and gas blocks under various NELP rounds and overseas, was to insulate BPCL from high oil price volatility and meet as much as 30 per cent of the parent firm’s crude requirement from its own E&P business.

BPCL and other public sector oil marketing companies like Indian Oil and Hindustan Petroleum have been hit hard by rising crude prices globally, as the country imports over 80 per cent of its oil requirement.
Agencies

The three firms had a combined borrowing of Rs 96,727 crore at the end of March, which has now risen to Rs 119,282 crore or over 23 per cent, according to a presentation made at the Parliamentary Consultative Committee on Petroleum and Natural Gas.

They lost Rs 235 crore per day on selling diesel, domestic LPG and kerosene at government controlled rates, Oil Minister S Jaipal Reddy said in his speech before the presentation at the meeting. Losses have forced the three companies to borrow heavily from the market even for their working capital requirement, which is leading to mounting interest burden on them.

“Due to increasing borrowings, oil marketing companies’ interest cost has also increased — from Rs 614 crore in 2003-04 to Rs 4,655 crore in 2010-1, which is likely to cross Rs 6,000 crore during the current year,” the presentation said.

Reddy said revenue loss or under-recoveries have had a significant adverse impact on the financial health of the oil PSUs, with diminishing cash flows and reduced resource generation for capacity expansion and modernisation.

“If their financial health deteriorates on account of the price under-recoveries, their ability to discharge their assigned task of supplying the entire country with petroleum products would suffer,” he added.

IOC, the nation’s largest oil firm, has seen borrowings rising to Rs 69,012 crore from Rs 52,734 crore as on March 31. BPCL has seen borrowings rising to Rs 22,820 crore from Rs 18,972 crore and HPCL from Rs 25,021 crore to Rs 27,450 crore.

“Delayed and insufficient compensation of under-recoveries is forcing oil marketing companies to resort to higher market borrowings to meet their capex as well as working capital requirements,” the presentation said.

During April-June quarter, the three firms lost Rs 43,526 crore on selling diesel, domestic LPG and kersoene at government controlled rates. Of this, the government has agreed to make good 34 per cent of Rs 15,000 crore. Another, Rs 14,509 crore has been provided by oil producers like ONGC, leaving Rs 14,017 crore unmet gap.

Rising borrowings have also resulted in deterioration of debt-equity ratios. IOC’s debt-equity ratio as on March 31 was 0.95:1, that of BPCL 1.35:1 and of HPCL was 1.99:1. This has slipped to 1.31:1 for IOC, 2.24:1 for BPCL and 2.71:1 for HPCL.
Agencies

Bharat Petroleum Corporation (BPCL) hired 362 persons, Engineers India (291), Hindustan Petroleum (275), Oil India (237) and GAIL India recruited 218 personnel. Balmer Lawrie hired 42, Beicco Lawrie (15) and Numaligarh Refinery (17).

“More than one-third of the new recruitments were from SC, ST and OBC categories. While 546 persons belong to SC category, 296 persons to ST category and 562 personnel to OBC category,” the statement said.Of the 3,872 personnel hired, 1,494 were management cadre and rest 2,378 non-management cadre. ONGC hired six in management cadre and 1,420 in non-management grade.
Agenices

Diesel will now cost just over Rs 41 per litre in the capital after the government panel raised prices by a record Rs 3.4 (7.6 US cents) per litre including local taxes. It also raised kerosene and cooking gas prices.

BofA raised its target price on HPCL to Rs 500 from Rs 441 and on Oil India to Rs 1,756 from Rs 1,583, while keeping its “buy” rating on both stocks. BPCL’s target price was raised to Rs 739 rupees from Rs 650 and BofA kept a “neutral” rating on the stock.
Agencies

Indian refiners are struggling to find takers for their diesel import tenders as traders target more lucrative sales to disaster-hit Japan.

Murali, however, said the company has no plans to change a 45-day maintenance shutdown of a 60,000 bpd crude unit, a visbreaker unit and a fluid catalytic cracker (FCC) at Vizag refinery. The shutdown will begin in November, he said. HPCL runs a 130,000 barrels-per-day (bpd) refinery in Mumbai and a 166,000 bpd plant at Vizag, in the southern state of Andhra Pradesh.

The state-run Bharat Petroleum (BPCL) has deferred shutdown of a hydrogen unit at its Mumbai refinery and a diesel unit at the Kochi plant to meet local fuel demand, its head said on Monday. “No dates have yet been decided … But we have deferred the planned shutdowns scheduled for April,” RK Singh said.

BPCL operates a 240,000-bpd refinery in Mumbai as well as a 190,000-bpd refinery at Kochi in the southern Indian state of Kerala. It also owns a majority stake in a 60,000 bpd refinery in northeast India.

Indian Oil Corp may consider deferring shutdowns of units at some of its refineries to meet local fuel demand, its head of refinery BN Bankapur said.

“If situation continues like this, when Indian fuel demand is rising at a fast pace and so are international fuel prices, being the largest state-run oil marketing firm we may have a re-look at our shutdown plans,” BN Bankapur  said. “I am a state-run firm, I have to run for the country,” Bankapur added.

IOC plans to shut a hydrocracker and some other units at its biggest Panipat refinery in May for routine maintenance. IOC is India’s biggest refiner with a capacity to process 1.294 million bpd oil.
Agencies

BPCL will restrict operations at its two loading berths at the port, closing one and reducing work at the second, for three days from March 21.  “This is due to the planned dismantling of the MS Structure platform,” GAC said. “It will not be possible to handle any vessel at Berth LB-2 or any petroleum cargo vessel at LB-1 during this period.”

The two berths can handle 5.5 million tonnes, or 43.45 million barrels, of oil each year, according to the port’s website.
Agencies

This is the first time that the government has acknowledged the two issues on paper, though they have been widely known. The government pays Rs 356 on each cooking gas refill and Rs 21.6 on a litre of kerosene as subsidy.

The black market in diverted kerosene alone is estimated to be in excess of Rs 10,000 crore, according to a 2005-06 study by National Council of Applied Economic Research. At today’s open market price and an annual volume of 9-10 million tonnes a year, this will be worth some Rs 15,000 crore.

Diversion of subsidised cooking gas for commercial use too is a big business because of the near-double price difference. Though no official estimate is available, executives of state-run oilmarketing companies say almost 9-10% of the six million tonne LPG (liquefied petroleum gas) meant for domestic use – or 42 lakh cylinders – is diverted for commercial use in a year.

No wonder, the document lists out subsidy and reluctance among policymakers to phase out or rationalise the dual-price regime as a weakness. It also says the situation puts state-run oilmarketers at a disadvantage.

On external threats, the paper says interest rates in developed economies, primarily the US, leads to infusion of money into commodity market that leads to speculation. This was suspected behind the recent spike in tradings in oil counters of domestic commodity exchanges.

On the same lines, the paper says volatility in international oil prices and fluctuations in foreign exchange rates too lead to unpredictability of losses on account of government’s control over fuel price. The situation obstructs any stable burden-sharing mechanism.

As a truism, the paper says growing dependence on imported oil is a cause of worry since it makes India vulnerable to geopolitical developments and exposes it to pricing pressures. The way forward, the paper suggests, is to diversify sources to avoid dependence on any particular region and creation of strategic storages quickly to guard against sudden supply disruptions. Simultaneously, efforts must also be made to ramp up domestic production through intensive exploration and technology upgrade.

Times of India