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BPCL to up gasoline output amid low diesel use
Indian state-controlled refiner BPCL will increase gasoline production to mitigate lower diesel demand, which is unlikely to rise in the coming years, the company’s executive director for international trade DV Mamadapur told Argus.
“BPCL is producing around 49pc of diesel and 19pc of gasoline. Earlier, the gasoline-to-diesel ratio used to be 1:2.3 or 2.4, now it has come to 1:1.5 or 1.4. So the gasoline requirement has increased and to commensurate with, diesel is not increasing,” he said.
Gasoline use has surpassed pre-pandemic levels, supported by an increase in personal transport, but diesel consumption fell on the month and from pre-Covid 2019 levels because of higher retail prices and a monsoon-induced fall in trucking activity.
The use of electricity in irrigation and railways and compressed natural gas (CNG) in heavy motor vehicles, as well as a push towards renewable energy sources and the increasing use of electric vehicles will weigh on diesel demand, which is likely to remain flat or taper down in the coming years, Mamadapur said.
BPCL operates a 240,000 b/d refinery in Mumbai, a 310,000 b/d refinery in Kochi and a 156,000 b/d refinery in Bina. “Both our [Kochi and Mumbai] refineries have the flexibility of increasing the swing between diesel to gasoline. We are able to use VGO crude grades in Kochi, [which] can be used in [the] fluid catalytic cracking unit (FCCU) and generate more gasoline. In Mumbai, we use naphtha-based crudes, which we can crack in [the] continuous catalytic reforming unit (CCR) and make more gasoline,” Mamadapur said.
Although BPCL’s diesel pool is bigger, other oil marketing companies (OMCs) are short of products this year and still have additional requirements for diesel, Mamadapur said. “And our main purpose is to meet full domestic demand… we have a surplus in system.” Other state-run refiners were operating at lower capacity, likely because of the disparity in motor fuel demand, market participants told Argus.
OMCs are also short of gasoline, Mamadapur said. “They are importing and we have a surplus. So, we have the bargaining power to give gasoline and diesel to our counterparts. As far as BPCL is concerned, we are secured for 3Q and 4Q to run our refineries at full capacity.” India’s current financial year ends in March 2022.
Fellow state-owned refiner IOC has emerged to buy gasoline cargoes through rare tenders while continuing to export diesel because of uneven motor fuels demand. HPCL has also sought gasoline cargoes. There are no expansions planned for the three refineries, but BPCL is looking to tweak some units to increase gasoline production and the swing between diesel and gasoline in the medium term, Mamadapur said.
Indian state-run refiners must reconfigure to target lighter products such as gasoline, naphtha and LPG and reduce the amount of diesel, said oil ministry secretary Tarun Kapoor earlier this month.
Oil demand growth
India’s oil demand will increase in the coming years as industrial expansion will lead to higher energy consumption, but structural shifts in the use of motor fuels such as the switch between gasoline, diesel, CNG and electric will continue to take place, Mamadapur said.
He thinks that there will not be any issues until 2040, unless something like hydrogen comes into the market in a big way and fossil fuels are drastically impacted.
Import, export strategy
BPCL was formulating a strategy for regular exports of oil products, moving away from exports based on the supply-demand imbalance, the company previously said, but did not divulge any additional details on the plans.
“We have got plans like semi-term or term contracts of 3 or 6 months based on our views of the international market and where cracks are moving,” Mamadapur said. But the company is not jumping into year-long terms because of market volatility, he added.
The Indian market is a top priority and the company will not export by starving the domestic market, he said, adding that BPCL has surplus refinery capacity and storage in its marketing locations to cater to domestic demand while it exports on commitments.
The company has also set up an integrated trading desk for procurement of crude and Mamadapur said that it evaluates over 350 crude grades every week, in line with an agenda to diversify its import basket. BPCL procured US grades for the Mumbai refinery and Azeri light and Umm Lulu for Kochi, as gasoline is the need of the hour, he added.
India is a net exporter of oil products and imports nearly 84pc of its crude needs. Crude imports in August rose by 16pc on the month to 4.11mn b/d but fell by 12pc from pre-pandemic August 2019, oil ministry data showed.
Decarbonisation efforts
There is a large push for renewable energy and there could be a reduction in investments in the fossil fuel refining sector in the longer term, while big investments are expected in areas such as solar power, hydrogen and green hydrogen production, Mamadapur said.
“India is surplus in refining capacity and exports. In the next 4 or 5 years, I am not seeing any investment in greenfield refineries,” he added.
Meanwhile, BPCL is exploring new business opportunities for sustained growth as the energy transition toward a low-carbon future has accelerated and there are plans to use green hydrogen as much as possible at its refineries, company chairman Arun Kumar Singh said.
Indian power minister RK Singh said last month that the country has already achieved an emissions reduction of 28pc from 2005 levels against a target of 35pc by 2030 as outlined in its nationally determined contributions, while it is anticipated that 80-85pc of overall power capacity will come from renewables by 2050.
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