Indian Oil to Raise Refining Capacity, Behuria Says

By Archana Chaudhary

Sept. 19 (Bloomberg) -- Indian Oil Corp., the nation's biggest refiner, plans to increase oil-processing capacity to 80 million metric tons a year by 2012 from 60.2 million tons now, Chairman Sarthak Behuria said in Mumbai today.

Indian Oil is investing in expanding its refining capacity and retail network to meet rising demand in the world's second- fastest-growing major economy. Economic growth faster than 8 percent in China and India, coupled with increasing car ownership among their combined population of 2.45 billion people, is expected to more than compensate for falling U.S. demand.

Behuria said high crude prices and under-recoveries are ``a burden'' and the company has ``pruned'' investment plans. Indian Oil's net under-recoveries, or the loss of revenue from selling fuels below cost, were 97.7 billion rupees ($2.1 billion) in the last financial year, he said.

Indian Oil, which accounts for roughly half the fuel sales in the South Asian nation, is losing 2.11 billion rupees a day selling diesel and gasoline below cost, Finance Director Serangulam V. Narasimhan said Sept. 16. The company lost 2.18 billion rupees a day in the previous fortnight.

India's crude oil imports rose 9 percent in the last financial year as domestic oil production stagnated at 34 million tons, Behuria said.

The refiner imported 45.73 million tons of crude oil in the last financial year and processed 47.4 million tons of fuel, he said. The company sold 59.29 million tons of fuels in the year to March 31.

Indian Oil, which is building 500 billion rupees of projects, plans to add 4,000 kilometers (2,500 miles) of pipelines to the existing network of 9,273 kilometers by 2012. The refiner, which is planning to build chemical plants and liquefied natural gas terminals, borrowed 350 billion rupees in 2008 compared with 270 billion rupees the previous year.

To contact the reporter on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.