Indian Petroleum Refining Insights Worlds Apart? – The Sectoral Divergence in the Indian Petroleum Refining Industry
The refining industry in India can be divided into two: the private and public sector. Here’s an overview of the comparison between the sectors in terms of product-mix, refining margin, capacity, pricing and market, and what this entails for the industry as a whole.
The Indian petroleum refining industry has a significant presence of both private and public sectors. Of the total installed capacity of 215.1 million metric tonnes per annum (MMTPA) as on April 1, 2013, 80 MMTPA (37.2 per cent of total) belongs to the private sector and 135.1 MMTPA (62.8 per cent of total) belongs to the public sector. Out of 22 refineries, 19 belong to public sector (including two joint venture refineries) and three belong to private sector.
All the public sector refineries are owned by state-run oil majors Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Oil and Natural Gas Corporation Ltd (ONGC). Reliance Industries Ltd (RIL) and Essar Oil Ltd (EOL) are the private sector refiners (refer Table 1). However, there is a wide gap between private and public sector refiners in respect of product-mix, refining margin, capacity, pricing and market.
Product–Mix: The Diversity of Refinery Products
Refined petroleum products can broadly be divided into three categories—light distillates, middle distillates and heavy ends. Light distillates include Liquefied Petroleum Gas (LPG), naphtha and motor spirit (Gasoline or Petrol). Middle distillates include kerosene, Aviation Turbine Fuel (ATF) and diesel (Gas Oil).
Heavy ends include lube oil, fuel oil, low sulfur heavy stock (LSHS), bitumen, pet coke, etc. Proportion of light distillates, middle distillates and heavy ends in the product-mix of a refinery depends upon the complexity of the refinery. Higher the refinery complexity, higher is the proportion of light and middle distillates in the product-mix.
Light and middle distillates are highmargin products while heavy ends are lowmargin products. In fact, crack spread (refining margin) of premium gasoline, gas oil (50 ppm Sulfur) and fuel oil in Singapore (Asian market) against Dubai crude averaged 5.0 US Dollar per barrel (USD/bbl), around 18.5 USD/bbl and minus USD12/bbl respectively in October, 2013.