HPCL chairman says plan for an oil refinery in Andhra Pradesh is being shelved

India’s state-owned Hindustan Petroleum Corp. Ltd. (HPCL) has shelved a plan to build a refinery in Andhra Pradesh, although it will go ahead with a proposed petrochemical unit, HPCL Chairman and Managing Director Nishi Vasudeva said. HPCL owns and operates two oil refineries, one in Mumbai with a capacity of 6.5 million metric tonnes per annum (MMTPA) and another in Visakhapatnam, with a capacity of 8.3 MMTPA.

During the 2014-2015 Fiscal Year, HPCL reported  a combined refining throughput of 16.18 MMT,  with a capacity utilization of 109%.

Vasudeva added that the company’s refinery at Visakhapatnam is being expanded to almost double its current capacity. The additional capacity from this expansion should be sufficient for the foreseeable future, she said. Due to the huge investment in building a grassroots refinery, as well as a supply glut, companies have been wary of building additional capacity recently.

However, HPCL will proceed with the plan to build a petrochemical plant in partnership with GAIL Ltd., the government-owned gas distributor. The two companies had discussed the possibility of building a refinery and petrochemical complex for years.

“It’s early days,” Vasudeva said, adding there was no final decision yet on the equity structure between GAIL and HPCL or whether it should look for a foreign partner.

An executive at GAIL said the company was working with HPCL on this but a final plan will take some time to get ready. He added that the central government was committed to building the complex.