BPCL plans to invest Rs 1 trillion in oil refinery and petrochem projects in Andhra Pradesh

Government-owned Bharat Petroleum Corporation Ltd (BPCL) is planning to invest Rs 100,000 crore (Rs 1 trillion) in Andhra Pradesh, of which a majority of capital expenditure (capex) will go for oil refinery and petrochemical plant. If materialized, this project will accelerate Andhra Pradesh economy and boost employment generation, in addition to better infrastructure around this plant.

A BPCL delegation led by the Chairman and Managing Director (CMD) G Krishna Kumar met with the Andhara Chief Minister N Chandrababu Naidu at the Secretariat in Amravati to evince its interest in setting up a oil refinery and petrochemical project in the state. Andhra Pradesh Industries Minister TG Bharat confirmed the meeting and showed confidence in this plant. Bharat further stated that the BPCL delegation will meet the Chief Minister again after three months following finalizing its suitable location for this project.

Understandably, the company told Naidu that it was ready to invest massively in Andhra Pradesh, with primary interest in oil refinery. Of the entire allocation of Rs 100,000 crore, BPCL is planning to make an initial investment of Rs 50,000-75,000 crore. However, the investment will accelerate to Rs 100,000 crore in a scattered manner. The government-owned oil marketing company (OMC) has identified three locations. However, it is yet to zero in on the probable location for the oil refinery. Additionally, a Vietnamese electric vehicle manufacturer VinFast also expressed willingness to set up a shop in Andhra Pradesh.

Unveiling the proposal on the social media 'X', Naidu stated, "We explored the establishment of an oil refinery and petrochemical complex in Andhra Pradesh with an investment of Rs 60,000-70,000 crore. We have directed the officials to prepare a detailed feasibility report in 90 days. It is significant to note that Andhra Pradesh is strategically located on the east coast of India with significant petrochemical potential. For the project of this magnitude, a land parcel of 5,000 acres is required which the state government will be looking forward to facilitating in a hassle-free manner."

Location change
Earlier, BPCL was planning to set up the oil refinery and petrochemical project in Gujarat or Madhya Pradesh. However, the meeting of the BPCL delegation with Andhra Pradesh yielded a positive result. The company has now zeroed in on Machilipatnam, Andhra Pradesh, as a suitable location for the proposed oil refinery and petrochemical project.

The proposal is to establish the oil refinery and petrochemical complex at Machilipatnam. This Complex is expected to be a game changer for one of the oldest municipalities in India, where population is on the decline. The Machilipatnam port is under construction, and a refinery will give more impetus to industrial growth in the city. Naidu offered all kinds of support to investors.

Additionally, BPCL is looking to develop a sea port in Machilipatnam near to this proposed oil refinery and petrochemical project. Currently, BPCL operates three refineries each one in Mumbai, Kochi, and Bina in Madhya Pradesh, with a cumulative annual refining capacity of around 36 million tonnes per annum (MMTPA), and the new proposed refinery may have an additional capacity of 12 MMTPA.

Highest-ever net profit
BPCL has recorded its highest ever net profit of Rs 26,674 crore in the financial year 2023-24, a significant increase from Rs 1,870 crore earned in the previous year. For the January-March 2024 quarter, the revenue from operations stood at Rs 132,085 crore, and net profit at Rs 4,224 crore. Against the capital expenditure (capex) target of Rs 10,000 crore for the financial year 2023-24, the company has spent approximately Rs 11,702 crore. BPCL budgeted a total capital allocation of Rs 16,400 crore for the financial year 2024-25. On the standalone basis, the company enjoys a net worth of Rs 74,675 crore.

Overall, BPCL is complementing its high-class assets with the high operational excellence, prudent capital allocation, disciplined project execution and delivering consistent shareholder returns. Of the total capex lined up for the financial year 2024-25, the major amount of Rs 4,200 will go for refinery and petrochemical projects. And for marketing, the company is going to allocate around Rs 7,000 crore for various projects, mainly including the City Gas Distributions (CGDs) and the existing projects. And for the subsidiary, BPRL, it is planning to increase around Rs 2,000 to 2,500 crore of equity during this year. So, with this, the total capital outlay of the company is proposed at Rs 15,000 - 16,000 crore for the financial year 2024-25.

Bina refinery expansion
BPCL is expecting the scaling up for Bina project in the financial year 2027-28. For next year also, the capex will be around Rs 16,000 to Rs 20,000 crore range. The major capex spending for these major projects will be in the financial year 2027-28 onwards. The peak capex will happen from the financial year 2027-28 onwards.

Over a period of five years, BPCL is planning the projects as already announced in the petrochemicals segment. The two projects BPCL has announced for Rs 49,000 crore plus Rs 5,000 crore as stated earlier. Additionally, it got around 52 CGD licensing areas where the company declared a capex outlay of Rs 25,000 crore in the first five years, and Rs 45,000 crore for over a period of life.

There are small refinery projects, ongoing projects and marketing side ongoing projects. BPCL is expecting at least 2 gigawatt of renewable energy for which it will entail an expenditure of approximately Rs 10,000 crore. With all these, the actual capital outlay will be around Rs 170,000 crore for a period of maybe five years or five-and-a-half years.

Kochi refinery
The operating capacity at Kochi Refinery stood at 60 percent in the financial year 2023-24. The company operated all these plants at 70 percent so far this year. The total production of the previous year stood at 197.15 metric tonnes TMT, which moved up to 232 TMT so far this year. There is a significant increase of product operating capacity utilization. The gross margin during this year from petrochemicals is around Rs 560 crore as compared to Rs 364 crore achieved the previous year.

The company has an ambition to achieve around 10 gigawatt of renewable power capacity over the next 15 years. By 2040, it wants to create a 10 gigawatt of renewable capacity. It will significantly help in cost efficiency in terms of the energy consumption at associated refineries.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com