Ready to roll

New Delhi, Feb. 6: Bina Refinery — a joint venture of Bharat Petroleum Corporation Ltd (BPCL) and Oman Oil Company — will begin commercial production by the middle of this month. Bina is the first of a series of refineries to commence production by 2011-2012.

“All the units of the refinery have been commissioned sequentially and full commercial production should start by February 15,” a company official said.

The Madhya Pradesh-based refinery will have an annual capacity of 6 million tonnes (mt). Oman Oil Company holds a 26 per cent stake in the joint venture — Bharat Oman Refineries Ltd — while BPCL owns the rest.

India can become a major global hub with the commissioning of a series of refineries before the end of 2011-12 that will raise annual capacity to 238mt from 196.38mt .

Other refineries scheduled to start production are the units at Punjab’s Bathinda (capacity 9mt), Orissa’s Paradip (15mt) and Tamil Nadu’s Cuddalore (6mt). Some refiners are expanding capacities in Haldia, Mumbai, Visakhapatnam, Manali, Panipat, Mangalore and Koyali.

Nearly half of Bina refinery’s output will constitute diesel. It will also produce 0.6 million tonnes of petrol and jet fuel each, and the fuels will be sold within the country.

“However, if there is an excess of naphtha that is not sold in India, it will be exported,” the official said.

Crude is being imported mainly from Saudi Arabia. BPCL has contracted 0.5mt crude to start the refinery. Bharat Oman Refineries has laid a 1,000-km pipeline from Vadinar in Gujarat to transport the crude. The refinery is estimated to cost Rs 11,397 crore.

According to the official, Bharat Oman Refineries plans to expand Bina’s capacity to 15mt by 2016-17.

India imports almost 80 per cent of its crude requirements. The surplus refined petroleum products are exported. During 2009-10, India exported about 51 million tonnes of petroleum products.

Refiners are in a rush to commission units to avail themselves of the seven-year tax holiday that will apply if the units start production by 2011-12.

Oil ministry officials said new refineries would be required to earn margins of at least $10 a barrel to service their capital needs alone. To cover operational costs, a margin of another $3-4 a barrel is required. Thus, a new refinery will have to earn a gross margin of approximately $13-14 a barrel to be financially viable.

This could be achieved if the refineries come up quickly as not many countries are expanding their refining capacities.