MUMBAI Hindustan Petroleum Corp plans to invest around $3.8 billion to ramp up its refining capacity by two-thirds this decade, as the country's oil demand soars and to meet cleaner fuel standards, a company official told Reuters.
Fuel demand in India - the world's third-biggest oil consumer - is rising at its fastest clip in more than a decade, buoyed by Prime Minister Narendra Modi's manufacturing push and as an expanding middle class buys more cars.
State-run Hindustan Petroleum (HPCL) aims to raise its capacity to process about 500,000 barrels per day (bpd) of crude by investing around 250 billion rupees ($3.76 billion), refineries head, B. K. Namdeo, said in an interview.
HPCL aims to boost the capacity of its Mumbai refinery to 190,000 bpd by July 2019 from 130,000 bpd, while the Vizag refinery in India's south will ramp up to 300,000 bpd from 166,000 bpd by July 2020, he said.
"We will de-bottleneck the capacity of the two CDUs (crude distillation units) at Mumbai and replace a 46,000 bpd CDU at Vizag with a new 180,000 bpd crude units," Namdeo said.
Alongside the expansion, HPCL will also revamp its gasoline and diesel production units to meet rules on producing cleaner fuels from 2020.
Namdeo said HPCL, which traditionally relies on Middle Eastern crude, had for the first time signed a term contract with Nigeria's national oil company, NNPC, to buy 32,000 bpd of oil this fiscal year ending March 31.
Since HPCL does not process all the grades offered by NNPC, it has entered into a swap agreement with trader Vitol, he said, without specifying the terms.
HPCL, which had halted Iranian oil imports in 2012 after western sanctions, is now looking to buy 20,000 bpd from the Middle East country.
But Namdeo said obstacles remained even after sanctions targeting Iran's nuclear programme were lifted in January.
"Insurance and banking issues have to be resolved still and there is no clarity on them (yet)," he said.
HPCL was considering using Iranian oil to replace some of the Basra crude it buys under an optional contract with Iraq's oil marketing firm, SOMO, and Total, he said.
HPCL has an annual deal to buy 65,000 bpd of Basra from SOMO and about 25,000 bpd of Basra and UAE's Murban oil from Total with an option to raise the quantities.
"We are maximising bitumen production and cutting fuel oil so for that we need heavy oil," he said.
HPCL has renewed its contract to buy 50,000 bpd from Saudi Arabia and 20,000 bpd from Abu Dhabi National Oil Co (ADNOC), he said, adding it also has an optional contract to buy 20,000 bpd from Kuwait.
($1 = 66.4240 rupees)
(Editing by Ed Davies)
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Updated Date: Apr 19, 2016 23:15:11 IST