With lubed-up economy, petro refineries recovering from slide

Production of refinery products in May jumped 7.9%. Second in a five-part series analyses how India's economic growth is driving its energy consumption

Petroleum refineries are coming out of their slowdown phase thanks to improved economic activity. Production of refinery products in May 2015 jumped 7.9 per cent, against contraction of one per cent, 1.3 per cent and 2.9 per cent in February, March and April 2015, respectively.

Overall, refinery output in April-May 2015 rose 2.6 per cent, against contraction of 1.9 per cent in the corresponding period last year. "Usually in May, we try to process more crude as this is a good month to make money. The demand for diesel, petrol and aviation turbine fuel increases because of increased travel activity," said the refinery director of an oil marketing company.

Though overall, the consumption of all petroleum products registered a growth of 2.9 per cent in May 2015 over May 2014, there was an 8.9 per cent growth in petrol consumption during May 2015 over May 2014 and a cumulative growth of 13.5 per cent for the period April to May 2015.

The high growth in MS consumption is due to shift of consumer preference from diesel to petrol driven vehicles and continuous high sales of passenger vehicles for more than last six months, said Petroleum Planning and Analysis Cell (PPAC) report.

Crude oil processed by refineries in the country stood at 19.7 million tonne (mt) in May 2015 against 18.3 mt in May 14. Indian Oil Corporation (IOC) processed 5.8 mt crude across its 10 refineries in May 2015 against 5.3 mt in May 2014.

While RIL's refineries processed 5.8 mt of crude in May 2015 against five mt in April 2015, Essar Oil refinery processed 1.8 mt in May 2015 against 1.7 mt last year

Refineries of BPCL and HPCL, on the other hand, processed 2.8 mt and 2.2 mt, respectively, in the said period. According to PPAC, India's economic growth is driving India's energy consumption. "India's economy grew at a fair pace of 7.3 per cent in 2014-15. The 7.3 per cent GDP growth rate was underpinned by a robust 7.1 per cent growth in manufacturing and 11.5 per cent surge in financial services and real estate business," said a PPAC report.

Oil refiners said the refinery throughput would have been higher but for planned shutdown of refineries impacting a higher crude oil processing capacity. For instance, HPCL's Mumbai refinery, which was under shutdown from April 25 to June 1, 2015 is further extended due to issues in the FCCU (Fluid Catalytic Cracking Unit), a device used in refining oil. Hindustan Mittal Energy Limited's (Bathinda refinery) continuous catalyst regeneration (CCR) unit was also under planned shutdown till it stabilised during first fortnight of May 2015.

The natural gas consumption witnessed an overall decline of about 10.79 per cent during the period as compared to May 2014.

In terms of volumes, total consumption during May, 2015 was 2,942 million standard cubic metres as compared to 3,302 million standard cubic metres (mscm) in May 2014.

Cumulatively gas consumption declined by minus 8.56 per cent to 7,144 mscm during April to May 2015 as compared to 7,813 mscm during the same period last year. Natural gas consumption has shown decline predominantly due to reduction in domestic gas production and lower offtake of gas in core sectors.