BPCL plans to set up new refinery for Rs 50k cr

Mumbai: State-run Bharat Petroleum Corporation (BPCL) plans to set up a new 12 million metric tonnes per annum (MMTPA) refinery in the country, two industry officials aware of the development told ET. The state-owned oil marketing company will invest around Rs 50,000 crore in the project for which it is currently evaluating locations in three states - Andhra Pradesh, Uttar Pradesh, and Gujarat, they said.

"BPCL is planning another refinery either on the east coast or on the west coast as India needs more refineries to meet the increasing fuel demand," one of the officials said. "Talks are at a preliminary stage." The company may also consider UP, the officials said.

BPCL did not respond to an email query till press time on Monday.

Last month, BPCL chairman G Krishnakumar said the company is planning to increase its refining capacity to 45 mmtpa by FY29.

The company runs three refineries in Mumbai, Kochi, and Bina (in Madhya Pradesh) with a combined annual refining capacity of around 36 MMTPA.

BPCL plans to invest about Rs 1.7 lakh crore over the next five years in its core oil refining, fuel marketing, and petrochemical business and in the clean energy business. Of the total capex, it has earmarked Rs 75,000 crore for refineries and petchem projects, Rs 8,000 crore for pipeline projects, and more than Rs 20,000 crore for its marketing business.

The second industry official cited above said BPCL is looking to set up a new refinery because a proposed plan to set up a 60-MMTPA integrated refinery and petrochemicals complex on the west coast in Maharashtra did not take off. The government had in 2015 proposed the idea of setting up Asia's largest refinery in Ratnagiri, Maharashtra, at the cost of Rs 3 lakh crore to meet the country's growing demand for fuel and petrochemicals.

A joint venture company between Indian Oil Corporation, BPCL, Hindustan Petroleum Corporation and Saudi Aramco - christened Ratnagiri Refinery and Petrochemicals (RRPCL) - was formed in 2017 to execute the project. Saudi Arabia's national oil company held 50% stake in RRPCL while the three national oil companies of India were equal partners.

However, due to environmental concerns and opposition from a number of local residents, the project never got off the ground.

At the same time, fuel demand has also been increasing, driven by higher automotive fuel and naphtha sales. Fuel demand reached a record high of about 233.276 million tonnes in FY24 compared to 223.021 MT in the previous year.

To cater to the increasing oil demand, India is looking to increase its refining capacity by nearly 80% from the present 252 MMTPA to about 450 MMTPA by 2030.

The country is planning to set up smaller petroleum refineries as they pose fewer hurdles like land acquisition and other regulatory clearances. According to analysts, even as fuel demand grows across the world, new refineries are not coming up and the old refineries in Europe and the US are closing.

"World over refineries are closing, which may lead to a crisis of finished products," one of the industry officials cited above said. "This is where India can step in and become a refining hub for the world. But for that, we need to add more refining capacity. Fuel demand is predicted to be robust in the coming years."

Goldman Sachs in a report dated May 27 said most of the (international) refinery closures took place between 2020 and 2022 when refineries were forced to shut due to the Covid-19 pandemic, poor economics, regulatory changes, and geopolitical tensions.

"Outside of refinery closures already announced, Wood Mackenzie assess that 4% or 3.6 mb/d of global refining capacity is at a high risk of closure," the report said. "Based on their outlook of 2030 refining margins 45% of such high-risk sites are located in Europe, where a number of standalone catalytic cracking facilities could come under pressure due to local carbon taxes and weaker gasoline cracks in the medium term."