Amrita Pillay

Mumbai, June 11th.

The Indian oil company (IOC), headed by S tate, said Wednesday that the capacity of its refineries exceeded 80 per cent as demand for oil products doubled in May.

As the Guwahati refinery will be operational after the maintenance shutdown, it also plans to operate its refineries at an average rate of 90 percent this month.

IndianOil’s refineries have so far reached a production capacity of 80 per cent, with consumption of all petroleum products combined almost doubling by May 2020 from its April 2020 level, according to a statement by the country’s largest oil refinery.

In May, the company’s capacity was 55% of nominal capacity. By the end of May it had reached 78%. At the beginning of April, the refinery’s capacity utilisation dropped to almost 39%, according to the company.

According to the IOC, the company intends to issue the approved Rs. 26 143 in FY 2020-21 (FY 21) for the planned capital investments.

However, not all oil companies continue to implement their investment plans. For example, Bharat Petroleum Company (BPCL) plans to spend between Rs. 8,000 and 8,500, which is less than its usual investment of Rs. 11,000 per year.

BPCL reduced its investments due to reduced project activity during the shutdown and lower profitability.

Hindustan Petroleum Company (HPCL) has postponed the completion of the expansion of the Bizag refinery until at least October-November because of labor shortages and monsoon rains, according to Reuters on Wednesday.

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For the IOC, the demand for products on the market has increased, together with the export of strategic products.

According to the IOC, the increase in demand for petrol in May compared to April this year was about 70% and for diesel about 59%.

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Demand for petroleum products such as petrol and diesel fell to 30% of normal demand in April as a result of a national blockade restricting passenger traffic.

However, the year-on-year comparison still shows a weak trend in demand for these products.

Compared to May 2019 or the first months of this year before the freeze, the growth rate for all products is expected to increase by a further 24 to 26%. In the case of liquefied petroleum gas (LPG), where the IOC produces around 2 500 000 cylinders per day, the average time is less than one day, according to the company.

The IOC stated that the demand for kerosene (ATF) is still low, about 24% of the normal level. Demand for fuel oil and special products such as fuel oil, bitumen, petcox and sulphur has also improved significantly and has contributed to the increase in refining capacity, according to the IOC.

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The general decline in demand at this time is expected to have a further impact on the margins of the Indian refinery.

The rating agency CRISIL indicated in its April report that the gross refining margin fell by more than half in the first quarter (April-June) of the 21st century. Given the fall in demand, it is likely that the price will fall in the second fiscal year.

CARE Ratings – in an updated version of its FY20 and FY21 oil and gas report released this month – stated that its oil consumption for FY21 will fall by 7.3%. This is due to the fact that crude oil processing by oil refineries is likely to decline as a result of the sharp drop in demand in the domestic and global economy caused by declining demand for petroleum products.

The report added uncertainty about the duration of the pandemic, which could also contribute to the closure of the refinery.

Indian refineries tend to work more than indicated in their factories, but given the current situation most of them have stated that there is force majeure and are not in operation, the report says.