By RAKESH SHARMA
NEW DELHI -- Bharat Petroleum said Friday it will spend INR142.25 billion ($2.8 billion) by December 2015 to expand its Kochi refinery in southern India by 63%, as it seeks to keep its capacity in line with its refined fuel products sales volume.
India's second-largest state-run refiner and fuel retailer by capacity will increase the Kochi refinery's capacity by 120,000 bpd to 310,000 bpd, it said in a statement to the Bombay Stock Exchange.
Weakness in demand for refined petroleum products amid the global economic slowdown has led several European and US refiners to shut capacity.
However, state-run refiners in India and other emerging markets are ramping up capacities as the expanding economies drive demand for products.
The South Asian nation's state-run refiners and retailers also have an advantage over their private-sector peers as the government partly subsidizes them for selling diesel and cooking fuels at controlled rates.
There is no such subsidy for private players, virtually forcing them out of the local fuel retail market.
India's fuel products consumption is estimated to grow 4.3% in the financial year ending Saturday to 147.06 million tons, after growing 2.3% last year, government data showed, boosted by demand for transportation fuels.
BPCL currently has a standalone refining capacity of 430,000 bpd, or a tenth of India's total nameplate refining capacity.
The Mumbai-based refiner said it will also modernize its Kochi refinery so that it can produce cleaner and environment-friendly fuel products that can meet stringent specifications.
Post the expansion, the refinery will be able to process cheaper high-sulfur crude oil, which will help it improve margins and profit.
The company also aims to produce polymer-grade propylene from the project, which will be used as feedstock for a series of niche petrochemicals.
BPCL said it expects to get environmental clearance for the project in the latter part of the year.
Dow Jones Newswires