India’s Modi launches $6.8bln refinery

BARMER, INDIA: Indian Prime Minister Narendra Modi on Tuesday launched the construction of a $6.8 billion refinery in the western state of Rajasthan, hopeful to lift national capacity to meet the surge in fuel demand.

By 2030, India´s demand for petrol and diesel is expected to go up by two-thirds to 170 billion litres, as an expanding middle class spends on cars and air travel.

The 180,000-barrel-per-day refinery and petrochemical project in the state bordering Pakistan is being built by the country´s third-biggest state refiner Hindustan Petroleum Corp Ltd (HPCL) in a tie-up with the state government.

The foundation stone for the project was first laid in September 2013 by the then ruling Congress Party chief Sonia Gandhi.

However, the project remained a non-starter as the state government had not given adequate incentives.

The project is now estimated to be completed by 2022-23, Oil Minister Dharmendra Pradhan said.

Modi said the project will create employment for thousands of people in Rajasthan which elects a new state assembly in December. To make the project viable, the state government has offered an interest-free loan of 168.45 billion rupees ($2.63 billion) to HPCL to be paid back in 15 years from the commissioning of the project, Pradhan added.

Energy analysts are, however, skeptical about the project´s profitability in a land-locked desert state.

The Rajasthan refinery will have to bear the crude transportation costs as well as deal with water scarcity, said a senior executive at a private refiner who requested anonymity, citing company policy. Pradhan said underground water will be drilled in the region and will be desalinated and used in the refinery.