Chennai Petroleum to augment its net worth with Rs 1,000 crore infusion from IOC

Company's Resid Upgradation Project to go on stream by July 2016

Chennai Petroleum Corporation Ltd (CPCL), an Indian Oil Corporation (IOC) company, is set to record Rs 1,000 crore of infusion from its parent. The proposal for capital infusion by issue of preference shares to IOCL on a private placement basis has already been approved by the company’s board and shareholders.

CPCL also hopes to improve its bottom line with the Rs 3,110-crore Resid Upgradation Project, expected to commission by July next year. The scheduled date of completion of the project has been revised from December 2015 to July 2016 on account of delay in securing a clearance from the Ministry of Environment & Forests, resulting in re-tendering for certain contracts and a change in the scope and configuration of certain OSBL systems.

The project will help the company maximise its distillates yield, according to the company’s annual report.

Currently, liquefied petroleum gas (LPG), propylene and propane are stored in Horton spheres, while butylene is stored in above-ground bullets. A mounded bullet storage facility is also being set up, for Rs 279 crore.

CPCL is investing Rs 257.87 crore to replace the existing 45-year-old crude oil pipeline from the port here to Manali Refinery with a new one. For this, a coastal regulatory zone clearance from the Ministry of Environment & Forests was secured in January 2014, while the Ministry of Road Transport and Highways had given its approval in April this year. The Petroleum and Explosives Safety Organisation approved the project in May.

The project is scheduled to be completed by November-end 2016.

The capacity of the company’s diesel hydro-desulphurisation unit is proposed to be enhanced from 1.8 million tonnes per annum (mtpa) to 2.34 mtpa. Subsequently, the unit will be able to produce hydro-treated diesel with less than 10 ppm of sulphur.

The company aims to commission the project by March 31, 2017.

In October last year, CPCL had reported to the Board for Industrial and Financial Reconstruction, owing to erosion of half its peak net worth through the past four financial years. For 2014-15, the company had reported a loss of Rs 38.99 crore.

Despite an improvement in operational parameters, the company’s net worth fell from Rs 1,722 crore on March 31, 2014, to Rs 1,655 crore on March 31, 2015, primarily due to a steep fall in crude oil and product prices and the consequent inventory losses.

Considering further reduction in networth as on March 31, 2015, the company is required to report to BIFR within 60 days from the date of adoption of accounts by the members.