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Shot in arm for Bongaigaon Refineries

New Delhi, Feb. 11: Petroleum minister Ram Naik has given the go-ahead for allocating 1.5 million tonnes of high-quality sweet crude oil from the eastern offshore Ravva fields to Bongaigaon Refineries and Petrochemicals Ltd (BRPL).

The decision, which comes as a shot in the arm for the troubled BRPL, had assumed a political dimension with Andhra Pradesh chief minister Chandrababu Naidu shooting off a letter to Naik protesting the move.

Until now, the Ravva crude was being supplied to the Hindustan Petroleum Corporation (HPCL) refinery at Vizag in Andhra Pradesh. Since this crude has a very low sulphur content it is easier to process.

The cost of refining it is also lower, which has a direct impact on the bottomline of the refinery.

In fact, HPCL had also raised objections over the diversion of the crude to BRPL. However, the matter took a political twist with Naidu throwing his weight behind the HPCL management.

A team of northeast MPs had also met Naik and asked him to initiate steps to boost the profitability of the refineries in Assam.

The move to divert the crude is aimed at improving the economics of BRPL which was earlier suffering loss. As part of the revival process, the refinery was handed over to downstream giant Indian Oil Corporation (IOC) in March 2001.

While IOC had succeeded in turning around the refinery with its powerful marketing network, it is still not out of the woods. Large investments would have to be made to improve the quality of diesel and petrol produced by BRPL in order to meet the Euro-II equivalent emission norms and fuel specifications. These will be implemented throughout the country by April 2005. This will be followed by Euro-III norms by April 2010.

With the allocation of 1.5 million tonnes of sweet crude from Ravva, BRPL can postpone this investment at least for the Euro-II stage. Consequently, costly loans that would have to be taken can now be avoided. This welcome breather will enable the refinery to build financial muscle when the Euro-III stage comes.

BRPL is a 2.35 million tonnes refinery but has been running below its full capacity due to the shortage of crude in Assam. The 1.5 million tonnes of Ravva crude will thus form a major portion of its input.

The ageing oilfields in the northeast and the frequent political bandhs and blockades have hit oil exploration and production work in the northeast. The upstream oil companies have, therefore, not been able to meet their targets. The setting up of the Numaligarh refinery has also added to the increased demand with no commensurate increase in crude output.

The evacuation of finished petroleum products is also a problem as the local demand in the northeast can absorb only 1.4 million tonnes. More than 3 million tonnes of products have to be moved out. This involves a transport cost to the tune of Rs 400 crore for all the refineries in the region.

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