Indian Oil delays Paradip refinery commercial runs to Dec-Jan

KOLKATA (ICIS)–Indian Oil Corp Ltd (IOC) has pushed back the scheduled commercial operations of its greenfield Paradip refinery in Orissa province to either December 2015 or January 2016 from April-June this year, a company official said on Thursday.

Construction of the 15m tonne/year refinery is now 98% complete, and crude refining at the unit has started on a trial basis in May, but a few critical components have yet to start operations, the official said.

Because of the new delay, construction of IOC’s proposed 600,000 tonne/year polypropylene (PP) plant linked to the refinery will not start until the second quarter of 2016, which is the first three months of India’s fiscal year, the company official said.

The greenfield Paradip refinery was supposed to be completed in 2012-13, based on the original schedule, but suffered heavy delays, largely due to a lack of skilled manpower, as well as frequent work disruption because of workers’ strikes, the IOC official said.

IOC has so far invested $5.07bn or the $5.48bn estimated cost of the Paradip refinery, the official said.

The investment cost has risen to $5.48bn from the original estimate of $4.6bn in 2012-13 because of cost overruns and the depreciation of the Indian rupee, the IOC official said.

IOC’s additional investment of $500m to build a new PP plant in Paradip is tied to the commercial operations of the new refinery.

The 600,000 tonne/year PP plant may not be completed in mid-June, as envisaged in IOC’s detailed feasibility report, the IOC official said.

Time-overruns in the refinery and PP project would likely to have a chain impact on IOC’s overall strategic plan to invest about $3.5bn over the next three to five years to establish an integrated downstream petrochemical derivative portfolio linked to the refinery in Paradip, said a senior official at the provincial government of Orissa.

IOC is the designated anchor investor for the planned Paradip Petroleum, Chemicals, Petrochemicals Investment Region (PCPIR).