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Explained: Why India is trying to boost its oil refining capacity

India is set to double its refining capacity for crude oil to 450-500 million tonnes per annum by 2030. Why this boost? How will it be achieved?

Written by Karunjit Singh , Edited by Explained Desk | New Delhi | Updated: June 19, 2020 8:15:39 pm
Maharashtra oil refinery, India oil production, India oil refinery capacity Petroleum and Natural Gas Dharmendra Pradhan said the expansion in refining capacity will come from both brownfield and greenfield projects. (Express Photo/File)

India is set to double its refining capacity for crude oil to 450-500 million tonnes per annum by 2030 said Union Minister for Petroleum and Natural Gas Dharmendra Pradhan on Tuesday. The minister said the construction of a new refinery in Ratnagiri, Maharashtra with a refining capacity of 60 million tonnes per annum is set to start soon.

Why is this boost in capacity needed?

India’s current refining capacity of 249.9 million tonnes per annum exceeds domestic consumption of petroleum products which was 213.7 million tonnes in the previous fiscal. However, India’s consumption of petroleum products is likely to rise to 335 million tonnes per annum by 2030 and to 472 million tonnes by 2040 according to government estimates. India needs to boost refining capacity to meet growing demand.

How will this be achieved?

Pradhan said the expansion in refining capacity will come from both brownfield and greenfield projects. The new refinery project in Ratnagiri is one of the key projects in the planned expansion and has received investment from Saudi Arabia and the UAE’s national oil companies — Saudi Aramco and ADNOC respectively — which together own 50 per cent of the project while the remaining 50 per cent is owned by Indian PSUs, Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. Other key projects include a joint venture between HPCL and the Rajasthan government for a new refinery in Barmer Rajasthan with a refining capacity of 9 million tonnes per annum as well as the major expansion projects in existing refineries in Panipat, Paradip and Koyali.

What are some of the roadblocks in achieving this?

Experts said many of the projects by the state run oil refiners have been severely delayed in the past because of issues in acquiring the required land as well as in obtaining environmental clearances. IOCL’s Paradip refinery was initially expected to begin operations in 2012 but was only able to start operations in 2015 because it faced land acquisition and environmental clearance issues.

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