Domestic refiners shut down for maintenance as fuel demand wanes

Some firms also cut down their throughput

Domestic refiners — both state-owned and private — are initiating annual maintenance shutdowns for their refining capacities. The shutdown coincides with dwindling demand for petroleum products, after a strong revival in May and June.

Reliance Industries (RIL), Bharat Petroleum Corporation (BPCL), and Indian Oil Corporation (IOC) have all undertaken a maintenance shutdown in the past one month, in some of their facilities.

IOC undertook a shutdown at its Paradip refinery starting July 25; the refinery will remain shut till August 15. In July, RIL informed exchanges that it was planning to shut down one of its crude distillation units at Jamnagar, for routine maintenance and inspection activity. The distillation unit will remain shut for 3-4 weeks, starting the fourth week of July.

BPCL shut down a crude unit at its Kochi refinery for three weeks in July and has restarted operations at the facility. It plans to shut the continuous catalytic reformer at its Mumbai refinery for three weeks this month.

According to oil executives, demand for petrol was at 88 per cent of last year in July, and the same for diesel stood at 80 per cent.

M K Surana, chairman and managing director of Hindustan Petroleum Corporation (HPCL), said demand was weak due to the monsoon and, to some extent, localised lockdowns.

He added that the fast recovery seen in May and June was fuelled by essential services, and that the last mile of demand recovery (for petrol and diesel) would depend on other industries operating at normal utilisation.

“There are indications that the trend of secular recovery in auto fuel consumption, from the lows of 1-15 April, has reversed in July — probably due to re-imposition of lockdown in some cities,” analysts with ICICI Securities noted in a report dated August 3.

In tandem, some of the refining companies have cut down on throughput. In IOC, for instance, refinery utilisation was at 80-85 per cent in July, against 96 per cent in June. 

Utilisation for IOC capacity saw a plunge from 93 per cent at the start of July to 75 per cent at the end of the month, said company executives. For refiners like HPCL — which is a net buyer — Surana said it would maintain utilisation but could alter the purchase of petroleum products, accordingly. BPCL's refining capacity utilisation fell to 72.7 per cent in July, from 74.2 per cent in June. 

On the export front, net product exports saw modest contraction to 2.3 million tonnes (mt) in May from 2.7 mt in April, noted the ICICI Securities report. The report added that the contraction was steeper at 0.8 mt in June.

“Net diesel exports dwindled from 3.4 mt in April to 2.7 mt in May, and further to 2 mt in June,” the report stated.