Indian refineries may shut as fuel demand slumps

Refiners IOC, Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) have told the government that some of their inland refineries may have to be closed to cope with an anticipated 65-70pc drop in fuel demand this month from a year earlier. Run rates at inland facilities could fall as low as 30pc but coastal plants may operate at 65pc because of export opportunities, a BPCL official said.

Inland refineries account for around 30pc of India's total 5mn b/d crude processing capacity.

Refineries across India are operating at an average 50pc of capacity. Rates are lower at companies including state-controlled Chennai Petroleum and Mangalore Refining and Petrochemicals (MRPL), which have each shut two of their three crude distillation units.

Refineries risk facing technical problems and equipment issues if they run at low rates, especially given Indian refiners typically operate above their nameplate capacity. Shutdowns would cut output of LPG, one of the few fuels that is seeing strong demand thanks to a rise in home cooking.

Several state governments have already decided to maintain shutdowns of businesses and stay-home measures for residents until 30 April. India's nationwide 21-day lockdown is due to end tomorrow, but the federal government is expected to announce a two-week extension later today, with possible relaxations of the measures for some industries.

Refiners are also seeking tanker capacity this store their unneeded term crude supplies and aim to reroute some Middle East crude to India's strategic petroleum reserve (SPR). Middle East supplies account for about 60pc of India's total crude imports of around 4.5mn b/d.

There is around 40pc of capacity available at the 39mn bl SPR facilities at Visakhapatnam, Mangalore and Padur, mostly at the newest facility in Padur on the southwest coast, an official at state-owned Indian Strategic Petroleum Reserve said. The 18mn bl Padur has four compartments, of which one is full. The 11mn bl capacity Mangalore facility is slightly over half full.

India's diesel and gasoline demand slumped by around 24pc and 16pc respectively in March from a year earlier. Diesel consumption averaged 1.36mn b/d last month, the lowest since September 2016 and down from 1.79mn b/d in March 2019. Gasoline use fell to 588,000 b/d from 703,000 b/d a year earlier, the lowest since January 2018.

India imposed a nationwide lockdown on 25 March, limiting the impact on demand over the full month. The prospect of a shutdown for the whole of April threatens a much bigger fall in fuel use.

India's coronavirus cases have exceeded 9,000 with over 300 deaths as of today. Maharashtra, Tamil Nadu and Delhi among the most affected, according to government data.

By S Dinakar