High crude oil price may impact refining capacity addition plans

Prevailing high crude oil price and also sharp rupee depreciation may adversely impact India’s ambitious plan in creating surplus refining capacity. Refining capacity increased to 215 MMTPA in 2012-13 from 213 MMTPA in 2011-12. At present India has surplus refining capacity and is self-sufficient with regard to all major products except for LPG.

In the 12th Plan the goveHigh crude oil price may impact refining capacity addition plansrnment has planned to increase the refining capacity from 218 MMTPA to 313 MMTPA and achieve a net export surplus of about 100 MMTPA. By the end of 13th Plan capacity is expected to go up further to 365 MMTPA. In fact, after China, India is set to witness the largest capacity additions.

However, plans may go haywire due to rising crude prices and fuel costs impacting the profitability of the refining companies.

The only silver lining among the dark clouds is the fact that a lot of refineries, particularly in Japan and Europe, have gone for closure in face of newer environmental/quality requirements and due to their old process units as well as cost competitiveness with low capacity. This may provide some opportunities for Indian exporters of petroleum products.

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