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NEW DELHI – Chennai Petroleum Corp Ltd’s proposed mega project to replace its 1-mtpa Cauvery Basin refinery at Nagapattinam in Tamil Nadu with a new 9-mtpa refinery is likely to receive the official nod from the boards of the company and its parent–state-owned Indian Oil Corp Ltd–within three to four months, sources in the know told Cogencis.
The final technical specifications and cost estimates of the project, which has been at the planning stage for over three years now, were recently finalised, said a senior official with one of the companies. The final investment proposal will first have to be cleared by the board of Chennai Petroleum, followed by the board of Indian Oil, the official said, requesting anonymity. Earlier, the boards of the two companies had given in-principle approvals for the project so that pre-project studies and activities could start.
The capital cost to set up the new refinery is estimated at 329 bln rupees, as per project documents seen and reviewed by Cogencis. The new refinery is estimated to be completed and commissioned in around four years from the date of final investment approval by Chennai Petroleum and Indian Oil. Following the finalisation of technical specifications and other assessments, Chennai Petroleum has already applied for statutory approvals, including environment clearance.
Indian Oil and Chennai Petroleum officials were, however, tight-lipped on whether National Iranian Oil Co, which holds 15.4% stake in Chennai Petroleum through its arm Naftiran Intertrade, will participate in the project. Naftiran Intertrade is part of the promoter group of Chennai Petroleum. Indian Oil holds 51.9% stake in Chennai Petroleum.
The Iranian company had agreed to invest in the new refinery. However, following re-imposition of sanctions against the West Asian nation by the US in 2018, Indian Oil has been evaluating if investment by National Iranian Oil Co could attract US sanctions against Chennai Petroleum and Indian Oil. As per initial plans, 70% of the project cost was to be financed through debt, and the rest through equity.
As per project documents, the new 9-mtpa Cauvery Basin refinery will be designed to produce almost 4 mtpa of Bharat Stage-VI diesel, 1.80 mtpa of Bharat Stage-VI petrol, 676,000 tn per year of liquefied petroleum gas, and 300,000 tn per year of aviation turbine fuel, among other products. The refinery will also have a polypropylene unit with production capacity of 532,000 tn per year.
The new refinery will be designed to process two kinds of crude mix–either 4.5 mtpa each of Basrah Light and Basrah Heavy crude, or 9 mtpa of Iranian Light crude. The project would also include a dedicated single-point mooring for the refinery and a sub-sea pipeline to connect the refinery with Karaikal Port for product dispatch. Onland pipelines to supply products from the refinery to Indian Oil’s marketing terminal nearby will also be laid.
The total land requirement for the project is 1,345 acres, which includes 618 acres of the existing refinery’s area. The rest is being acquired by Chennai Petroleum.
At present, Chennai Petroleum’s total refining capacity is 11.5 mtpa. Apart from the 1-mtpa unit at Nagapattinam, the company has a 10.5-mtpa refinery at Manali on the outskirts of Chennai. After the new refinery at Nagapattinam comes up, Chennai Petroleum’s total refining capacity will increase to 19.5 mtpa, while Indian Oil’s consolidated refining capacity will rise to 88.70 mtpa.
At 1252 IST, shares of Chennai Petroleum were at 47.65 rupees on the National Stock Exchange, 3.1% lower from the previous close. Shares of Indian Oil were down 1.2% at 76.25 rupees on the bourse.