Indian Oil plans $2.4 billion expansion of Gujarat refinery

By Nidhi Verma and Neha Dasgupta

NEW DELHI (Reuters) - India's top refiner Indian Oil Corp will spend $2.4 billion to increase capacity at its refinery in western India by about a third over the next few years to meet rising local demand for fuel.

The plan, announced on Friday, will enable the plant in Gujarat state to process 360,000 barrels per day (bdp) of oil by the end of 2021. It is part of IOC's vision to increase its refining capacity by about 89 percent to 3 million barrels per day (bpd) by 2030 by building new plants and expanding some existing ones.

The 274,000 bpd Koyali refinery, built in 1965, has five crude units and IOC wants to replace four of them with a single 300,000 bpd crude unit.

The 150.3 billion rupee ($2.4 billion) expansion will also enable the Gujarat plant to process cheaper, tougher oil grades and improve profitability. The secondary units at the plant will be ready by the end of 2022, IOC said in a statement.

India has emerged as a bright spot amid soft demand for oil elsewhere in the world, but the South Asian nation's push to electric vehicles is forcing analysts to revise forecasts for fuel demand in the world's third biggest oil consumer.

The revamped plant will have the flexibility to withstand fluctuations in future demand and supply of fuels and to integrate with downstream petrochemical units, IOC Chairman Sanjiv Singh said.

The refiner is also setting up a 420,000 tonnes a year polypropylene unit at the refinery.

IOC is bolstering its gas imports and retail business as well, as India seeks to increase cleaner fuel's share to 15 percent of the country's energy use in the next few years from 8 percent currently.

The company's board has approved a plan to buy up to a 50 percent stake in the 5 million tonne a year Mundra LNG terminal on India's west coast.

The terminal, being set up by a joint venture between Gujarat State Petroleum and Adani Enterprises Ltd at a cost of about 50 billion rupees, will start operations in the first quarter of next year.

IOC currently imports liquefied natural gas at Petronet LNG's west coast terminal for supplying to industries. It is also building a 5 million tonne a year LNG terminal at Ennore on the east coast and hopes to commission the facility in 2018-19.

($1 = 63.6300 Indian rupees)

(Reporting by Nidhi Verma; Editing by Susan Fenton)