Asia fuel thirst puts new life into plant

09:09, February 26, 2010      

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Hindustan Petroleum Corp, India's third-biggest state-run refiner, revived plans to build a 200 billion-rupee ($4.3 billion) refinery and petrochemicals plant in southern India to benefit from rising Asian fuel demand.

"This project is for meeting demand in the country as well as for exports to other Asian nations," K. Murali, director of refineries, said in a telephone interview from Mumbai. "We are looking at the long term."

Asian refineries are expanding capacity to meet rising oil demand in the region even as companies in the developed world are halting operations as profits from processing fuel decline.

Energy consumption in India, Asia's third-largest fuel user, is expected to more than double to 833 million metric tons of oil equivalent by 2030, according to the International Energy Agency.

"Hindustan Petroleum's plans make sense considering the need to add refining capacity in India in the face of long-term rising demand," said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein. "There's a clear continuous growth in India's domestic fuels market at a time when refiners elsewhere are looking at a glut in the refining capacity."

Hindustan Petroleum last year postponed the plan to build a 15 million-ton refinery and a 2.5 million-ton petrochemicals plant near its existing 7.5 million-ton facility at Visakhapatnam, a city in Andhra Pradesh also known as Vizag. Partners Total SA and billionaire Lakshmi Mittal opted out as the recession crimped global fuel demand.

State-run Hindustan Petroleum may borrow as much as 70 percent of the funds needed to build the Vizag project, which will be part of a special economic zone planned by the Andhra Pradesh state government, Murali said.

GAIL India Ltd, the nation's state-run monopoly natural gas distributor, and Oil India Ltd will partner Hindustan Petroleum in building the project, he said without giving details. The refiner has been allocated 1,500 acres from the Andhra Pradesh government to build the plant, although the land has still to be transferred, he said.

The refiner plans to shut its 6.5 million-ton unit at Mumbai in the western state of Maharashtra and may sell 340 acres on which the current refinery stands to raise funds for a new 20 million-ton refinery in the same province, Murali said.

"The value we add from every barrel of crude oil processed will be the highest at the new plant," he said. "The existing refinery doesn't give us the kind of efficiency we have in mind."

Source: China Daily
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