14 years on, Paradip refinery to be inaugurated

Refining margin of the plant will be higher by $6-7 per barrel over the average refining margin of $10-12 by IOCL at present

Former prime minister Atal Bihari Vajpayee laid the foundation stone of the project in May 2002 and the current Prime Minister, Narendra Modi, will inaugurate it on February 7. The 15-million-tonne Paradip refinery of Indian Oil Corporation (IOCL), the largest in the eastern coast, has gone through lots of ups and downs to get to this stage. But, as it nears its commissioning date, IOCL is upbeat that the project equipped with superior technology to process high-sulphur crude oil, which can be sourced cheap, will bring windfall in terms of higher refining margins.

The refinery has been built at a cost of Rs 34,555 crore.

The refining margin will be higher by $6-7 a barrel over the average refining margin $10-12 earned by IOC at present. This is expected to boost the bottom line of IOC as it would improve the overall gross refining margin (GRM) of the company by $2-3 a barrel, said Ramjee Ram, executive director (in-charge) of the refinery project at Paradip.

Though the refinery can process all types of crude oil sourced from the Gulf nations, Africa and South America, it has no control on the supply of the feed as the crude is procured by the central procurement cell of IOC at Delhi, which decides the mix of crude to be sent to different refineries operated by the company. The refinery is equipped to produce low-emission BS-IV-compliant motor fuel, which puts it in an advantageous position as the country goes for stricter regulations on pollution front. “We can even step it up to produce BS-VI-compliant automobile fuel with the addition of few equipment. A study is on in this regard to ascertain the market and investment required for this purpose,” said Ram.

The government, with an objective to check automobile pollution, has set deadlines for switching over to BS-IV emission norms by April 2016 and BS-VI emission norms by 2020.

BIRTHING OF PARADIP REFINERY

• July 1992: Govt decides to set up the refinery in a joint venture (JV)
• Aug 1995: Govt approves selection of Kuwait Petroleum (KPC) as JV partner
• July 1998: Approval given for 9-mmtpa refinery project in JV with KPC
• Dec 1998: Odisha government gives incentives for project
• Aug 1999: IOC decides to set up refinery on its own due to uncertainty in venture with KPC
• Jan 2000: KPC withdraws from the project
• May 2000: Then prime minister Atal Bihari Vajpayee lays the foundation stone for the refinery
• Feb 2002: Project put off due to withdrawal of incentives by the Odisha government
• Feb 2004: The Odisha government restores incentives by signing a memorandum of understanding
• Mar 2006: Project gets in-principle approval with revised configuration
• Feb 2009: Final investment approval given

“It is not a problem for us to produce BS-VI-compliant fuel right now; the automobile sector has to first make the necessary changes in the engine to use this kind of fuel,” he added.

Paradip will be the first refinery under IOC to be integrated with a petrochemical complex. While the work on a polypropylene unit inside the refinery complex has already started, it intends to begin work soon on methyl, ethyl, glycol plant, coke gasification unit, paraxylene plant and purified terephthalic acid project. The additional investment on these projects will be Rs 30,000-35,000 crore.

The refinery, which intends to attain 100 per cent capacity in three years, will produce liquefied petroleum gas, propylene, petrol, diesel, naptha, and pet coke, which will mainly cater to the eastern and southern markets. “Though our priority will be domestic market, depending on the price advantage, some products can be exported taking advantage of the refinery’s location on the eastern coast,” said Ram.