Iran will invest about Rs 1,500 crore to expand a refinery run by Chennai Petroleum Corp, the company’s managing director said, amid US sanctions on the Persian Gulf nation that have severely hit its oil exports.
The state-run company is boosting capacity at its Nagapattinam facility by nine-fold to process 9 million tons per year and the investment is Naftiran Intertrade Co’s share of the Rs 27,500 crore ($4 billion) expansion plan, managing director SN Pandey said in an interview in Chennai last week. The rest of the investment will be through debt and equity, including fresh capital from its main founder Indian Oil Corp.
“We will achieve the financial closure in 2019,” Pandey said. “We don’t see any issue in debt raising. We have already talked to many bankers.”
While Naftiran’s investment will ease the Chennai Petroleum’s fund raising task, it will ensure Iran maintains its grip in India, where surging fuel demand has turned it into a prized market for global oil producers. For India, Tehran has been a reliable and cheap source of crude extending favorable credit terms, a key driver for New Delhi to convince Washington to grant some exemption from sanctions that restrict trade with the country.
Surging demand in India prompted Russia’s Rosneft Oil Co PJSC to acquire a private refiner in 2017, while Saudi Arabian Oil Co and Abu Dhabi National Oil Co have committed investments in a proposed plant as the nation adds capacities to fulfill fuel consumption needs that are expected to outstrip all other nations in the decades ahead. Naftiran, an affiliate of state-run National Iranian Oil Co holds 15.4 per cent of Chennai Petroleum, while Indian Oil owns 51.9 per cent, according to data compiled by Bloomberg.
Apart from boosting capacity, Chennai Petroleum is building a petrochemicals plant of about 4,75,000 tons per annum capacity, Pandey said. The new plants will enable the refiner to process dirtier and cheaper crude, apart from making more value added products. This year, it imported Iraq’s Basrah heavy crude for the first time and is now looking get shipments from the US, Pandey said.
The detailed feasibility report for the expansion project, that includes the petrochemicals plant, is expected to be ready by June. “Tentatively by December 2022, the whole complex will be ready,” Pandey said.
Chennai Petroleum operates a bigger refinery at Manali near the city of Chennai, with capacity to process 10.5 million metric tons of crude annually, or about 210,000 barrels a day.
