April 29 (Bloomberg) -- Mangalore Refinery & Petrochemicals Ltd. plans to spend $1.4 billion to expand crude processing at its facility in western India to meet growing fuel demand in Asia’s third-largest economy.
Mangalore Refinery, a unit of India’s biggest state-run explorer Oil & Natural Gas Corp., will raise capacity by 40 percent to 420,000 barrels a day by end-March 2018, Managing Director P.P. Upadhya said in an interview yesterday.
The company, known as MRPL, is planning the expansion after spending $300 million on a 60,000 barrel-a-day delayed coker that started earlier this month and $330 million for a 44,000 barrel-a-day fluidized catalytic cracker that will begin next month, Upadhya said.
“The new units will be major margin drivers,” potentially doubling the company’s profit per barrel, Upadhya said. “We will get full benefit of the coker and petro fluidized catalytic cracking units from this year that will support the expansion.”
The facilities allow the company to process cheaper, heavier crudes into high-value products like diesel, liquefied petroleum gas and propylene. Refiners including Indian Oil Corp., the nation’s biggest, are expanding capacity to meet rising domestic demand, which the oil ministry forecasts to grow by more than 21 percent in the four years to March 2017 to about 186 million tons a year.
Shares of the Mangalore-based company have gained 45 percent this year, compared with a 6.3 percent increase in the benchmark S&P BSE Sensex index. They were up as much as 2.2 percent at 62.90 rupees today.
MRPL is seeking to revive earnings after reporting losses in four of the past five quarters as the Indian rupee’s plunge to a record against the dollar drove up import costs. The company earned $2.42 for every barrel of crude it processed during April to December last year, compared with $2.60 a barrel a year earlier, it said in a statement Feb. 8.
Margins at Mumbai-based Reliance Industries Ltd., operator of the world’s biggest refining complex, were $7.80 a barrel in the same period due to its ability to process cheaper grades into high-quality fuels it can sell to Europe and the U.S.
“With the new units, we can buy 10 million tons of heavier grades out of 13 million tons of our annual imports,” Upadhya said. “We are planning about 2 million metric tons of Latin American crude in 2014-15 and 4 million tons of Iran Heavy and Norooz and Soroosh grades, as well as heavier grades of Iraqi crude.”
To contact the editors responsible for this story: Pratish Narayanan at email@example.com Ramsey Al-Rikabi