IOC to buy natural gas from RIL for replacing costlier fuel

The state-owned Indian Oil Corp (IOC) will buy 1.6 million cubic metres of natural gas a day from Reliance Industries (RIL) to replace costlier liquid fuel at its refineries.

IOC currently uses crude oil or fuel oil for production of hydrogen at its refineries, and natural gas from RIL's eastern offshore KG-D6 field will replace the costlier fuel, a senior company official said.

"We have tied up with GAIL India for transportation of the gas and are now waiting to initial the Gas Sale and Purchase Agreement (GSPA) with RIL," he said.

Last year, an Empowered Group of Ministers had allocated 5.384 mmcmd of gas from KG-D6 to public and private sector refineries, against their demand for 22.8 mmcmd.

IOC had demanded 6.58 mmcmd of gas for its Gujarat, Mathura and Panipat refineries, but as refinery as a sector was allocated less than one-fourth of its demand, the state- owned firm is being proportionately given 1.6 mmcmd, he said.

Gas flow to IOC's Koyali refinery in Gujarat is likely to start this month, and the same to Panipat would begin later this year after state gas utility GAIL builds a pipeline to carry the fuel to the unit.

The official said that while Koyali will draw about 0.8 mmcmd, the rest would be used at its Panipat refinery.

Last year, IOC had sought 1.92 mmcmd of KG-D6 gas for its Koyali refinery near Vadorara, 0.81 mmcmd for its Mathura unit in Uttar Pradesh and 3.85 mmcmd for its Panipat refinery in Haryana.

Besides this, Bharat Petroleum had sought 2.18 mmcmd for use at its Mumbai refinery, while Hindustan Petroleum wanted another 2.18 mmcmd for its refinery in the same city. RIL wanted 11.23 mmcmd at its twin refineries at Jamnagar in Gujarat while the neighbouring Vadinar unit of Essar sought 1.57 mmcmd.

All the refineries have been allocated KG-D6 gas proportionately, out of the 5.384-mmcmd firm allocation made by the EGoM in October last year. An additional 6 mmcmd was allocated to them on a fall-back or temporary basis.

While RIL's twin refineries have been given 4.49 mmcmd each, BPCL has been allotted 0.26 mmcmd, the official said, adding that the two firms are already drawing gas from KG-D6.

Use of gas in oil refining helps companies save on input costs and meet environmental norms.