Hindustan Petroleum Corporation Ltd. (HPCL), a state-run oil refiner, has announced plans to boost the capacity of its Vizag refinery by up to 20%. This expansion aims to meet the escalating fuel demand in India, the world's third-largest oil importer and consumer.

HPCL Chairman Rajneesh Narang revealed the expansion plans at the India Energy Week conference on February 11. The company is targeting an increase of 2-3 million metric tonnes annually (40,000-60,000 barrels per day). This proposed expansion follows a recent upgrade that brought the Vizag refinery's capacity to 300,000 barrels per day. Narang indicated that the project is currently under consideration and awaits board approval, though he did not disclose the estimated cost or timeline for completion.

HPCL is also focusing on enhancing the Vizag refinery's capabilities through the addition of new secondary units. The refinery will soon commence operations of a 3.5 million tonne-per-year residue upgradation unit. This unit is expected to improve the refinery’s distillate yield by 10% and boost its gross refining margin (GRM) by $3 per barrel. A 2.6 million tonne-per-year diesel hydro desulphuriser will also be brought online, further refining the quality of the produced diesel.

India's push for increased refining capacity is driven by its burgeoning energy needs and its ambition to become a key player in the global refining landscape. The country's fuel demand is projected to continue its upward trajectory over the next decade, fueled by economic growth and increasing vehicle ownership.

HPCL is diversifying its operations to prepare for energy transition towards electric vehicles. The company is currently constructing a petrochemical plant at its 180,000 barrel-per-day Barmer refinery in Rajasthan. This refinery is notable for its high petrochemical intensity, converting 26% of crude oil into chemicals. Crude processing at the Barmer refinery is slated to begin in June-July, with the petrochemical project expected to be operational by December.

HPCL plans to initially rely on spot oil purchases for the Rajasthan refinery, transitioning to annual crude purchase agreements once operations have stabilized. The company also operates a 190,000 barrel-per-day refinery in Mumbai. In total, HPCL imports approximately 21 million tonnes of crude oil annually, with 8-9 million tonnes sourced from spot markets. To optimize its crude procurement process and reduce costs, HPCL established a crude trading desk last year. This desk negotiates directly with oil sellers to secure more favorable terms, replacing the previous tender-based system for spot purchases.