Pre-Investment in Technology Will Continue to Pay Off

R Ramachandran
COO, BORL,
Bharat Oman Refineries Limited (BORL) opted for Nelson Complexity Index of 9.1 with hydrogen intensive hydrocracking units to produce the best class fuel for the BPCL – Oman Oil’s joint venture inland refinery in Bina in 2006 at the conceptualisation stage. The refinery was dedicated to the nation in 2011. R Ramachandran, COO, BORL, in an exclusive interview with Mittravinda Ranjan, reveals BORL’s plan to announce an investment of around 3000 crore towards debottlenecking of the refinery and increasing the current 6 MTPA capacity to around 7.8 MTPA.

Walk us through the idea behind setting up the ‘zero fuel oil refinery.’
Typically, as one would know, the business of refinery is all about margins. The joint venture refinery was planned with a clear vision of producing high value middle distillates - and not making low value fuel oils - to meet India’s future auto fuel demand. We opted to set up the hydrogen intensive hydrocracking and coking refinery with the Nelson Complexity Index of 9.1 to maximise middle distillates and produce Euro III / Euro IV compliant grades to serve the Indian market. We had factored the future trends and need to further upgrade the refinery in terms of capacity and quality - delivering Euro IV and Euro V complaint fuels.

BORL took the chance in 2006- 2007 to pre-invest in technology taking Euro III as the basis and Euro IV as the norm in next couple of years. And I am glad to share that the proposed India’s Auto Fuel Vision & Policy 2025 document suggests that the fuels should meet Euro IV standards by 2017, Euro V standards by 2020. We are now graduating to Euro V emission specifications before 2019-2020, which is the future of auto fuel in India.

We have a plant with which minimum investment will be Euro IV and Euro V simultaneously compliant for both diesel and gasoline. As compared to rest of the peers, who may require large investments to set up new plants or modify existing units, we can upgrade the plant to Euro V specs with minimum investment and in lesser time.

Diesel plays the predominant role in the product basket and accounts for almost 50 per cent followed by gasoline and aviation turbine fuel which account for about 16 and 15 per cent respectively. Rest of the products includes LPG, naphtha along with solid fuels like petcoke and sulphur.

Tell us about the strategy for selection of plant configuration.
At BORL, we have integrated Full Conversion Hydrocracker (FCHC) and Diesel Hydrotreater (DHT). The FCHC maximises the diesel production meeting the stringent qualities like low sulphur high cetane number etc and the DHT desulphurises the high sulphur diesel produced from the Crude and Vacuum Distillation Unit (CDU/ VDU) and Delayed Coker Unit (DCU). DHT also improves the cetane number of the streams to meet Euro III and IV norms.

The delayed coker process is based on severe thermal cracking to produce distillate products viz gas, LPG, naphtha and coker gas oil and some quantities of petroleum coke. The pet coke is used as the solid fuel for captive power generation in the refinery. The idea was to integrate solid fuel coming out of the plant with that of the power plant. We have installed Circulated Fluidised Bed Combustion (CBFC) boilers for generating power through Steam Turbine Generators (STG) using solids as the main fuel. No other refinery in India currently has solid fuel based power generation captive power plant and still use naphtha or gas for power generation. This configuration of Petcoke + CFBC Boilers based power generation is frequently looked at as the choice for the future.

Naphtha Hydrotreating Unit (NHT) process involves catalytic treatment of straight run naphtha to remove sulphur and other impurities and we produce full range of light to heavy naphtha in the Naphtha Splitter Unit (NSU).

The gasoline block is the other critical unit which has the Continuous Catalyst Regeneration & Reforming Unit (CCR) which produces high octane motor spirit component from heavy naphtha to finally produce high quality unleaded petrol. Hydro treated heavy naphtha from NHT is combined with recycle gas and sent to a series of reactors. Reactor effluent is separated into gas, LPG and reformate streams. This unit increases the potential of naphtha by virtue of which we are able to maximise the diesel and motor spirit which are high value fuels BORL intends to produce for the market.

What was the rationale behind integrating hydrocracker with diesel hydrotreater which was quite uncommon at that time?
Well, hydrocrackers and hydrotreaters are highly cost intensive and by integrating these two units we have been able to take care of some of the common things and been able to knock off the extra CAPEX and also reduce the OPEX in the longer term. Two stages of hydrocracker are integrated with diesel hydrotreater, which is first of its kind in the world. This idea has now caught up and there are more units coming up.

Tell us about the market position of BORL and how well geared are you for the future in Indian market?
BORL has been supplying high quality diesel in local Bina market. The high quality can be attributed to the hydrogenation process and all impurities are removed. I feel happy to say that what we had predicted has turned out to be the future. Currently, we produce 50 ppm fuel but we are capable of producing 10 ppm of market demands with the marginal investment. By incorporating a catalyst change or some modification we can be 100 per cent Euro V compliant.

We designed the process to handle 100 per cent high sulphur crude processing capability. It proved to be advantageous for us as we were looking at all crudes which were available in plenty and we were also not affected too much by the vagaries of low sulfur crude which are more in demand across the other refiners.

Our plan to pre-invest in technology has turned to be the best decision. Complete plant layout has been done in such a manner that the current level capacities can be increased in an optimal manner to up to 15 MTPA, two and a half times of existing 6 MTPA capacity to meet the growing future demand with appropriate investment.

BORL also enjoys the privilege of being the only on-land refinery within 400 km, strategically located to cater high demand of petroleum products especially in the Northern zone. The final products reach domestic market through pipeline transportation, roadways, railways etc.

We enjoy the locational advantage of being close to the high density markets including UP, MP, Rajasthan and Delhi and beyond through the pipeline network which connects us very well with the North and North Central Indian markets. Just to give an example, the pipeline network that runs from Bina up to North Indian states with tap offs at various points allows us to move faster on the forward market in more cost competitive way as compared to other competitors.

Our entire fuel production is directed for the Indian market and we already have our strategies in place to support our further growth. The North Indian market is elastic and growing at about 5-6 MTPA which would provide enough space to the competition. If the situation arises where other refiners start supplying export surpluses in local markets, we already have strategies in place to be more cost competitive.

We have the inherent advantage of having spent about ` 2000 crores to a million tonne which is much below the average cost being spent by other new refiners which puts us in a better position as far as returns on investments are concerned.

What about exports? Are you looking at feeding the international markets as well?
BORL is not a global player, we are India centric with a clearly defined market and for us it is more important to see if the Indian market is growing or not. Initially, we were exporting small quantities of naphtha since it does not carry great value in Indian context. However, with some innovative measures we started upgrading naphtha to motor spirit as a value addition and were able to reduce naphtha quantities to less than half. There are some occasional exports though but our middle distillates are targeted for the Indian market only.

In lieu of geopolitical issues in the Middle East what kind of challenges do you foresee for BORL in terms of crude linkages?
Strategically, the Middle East is most advantageous for us. We have entered long term understanding with some of the leading national oil companies and it has ensured long term business for them on one hand and enabled us to secure supplies on constant and stable basis on the other.

The North American market is now getting off the radar of the Middle East due to the locally available huge shale gas which has compelled the Arab nations to look out for different markets to redirect the crude oil production.

Over the last several years, highly crude demand too has eased out and major suppliers from Saudi, Kuwait and other Middle Eastern markets are looking for opportunity to have strategic long term relationship crude arrangement with Indian companies.

Though we have established strong long term linkages other options have not been closed as well. We are constantly looking at sourcing our supplies from other markets like Africa as well as other South American markets for different crude mixes.

Do you feel the expansion of middle distillate based refineries is the future for Indian refiners?
In my view, we have always underestimated the growth of diesel and gasoline in the Indian market as no one had predicted the manifold growth that the Indian refining sector has seen over the last couple of years.

Today, Indian refining capacity has surpassed 210 MTPA which surpassed the numbers projected under Vision 2020 of the hydrocarbon industry drafted in the year 2000. And now with the expectations of high growth rates, we might reach a situation where many of the inland areas may still remain product starved despite the expansions taking place. I think still the space would be there for everyone. All that one needs to do is to foresee the future trends and be ready to deliver specs for the future markets.

Tell us about your future plans
We are very close to announcing the debottlenecking of plant which would entail investments to the tune of around 3000 crores. We will increase the nameplate capacity from current 6 MTPA to about 7.8 MTPA and would operate at around 8 MTPA. We have already completed our feasibility report and are going for approval processes. We are likely to receiving the clearances for the project anytime soon. We target starting the project by end of this year and commission in next 36 months by around early 2018.