Lower Reliance LPG production to boost imports

Vol 7, PW 14 (24 Sep 03) Midstream & Downstream

India will have to import more LPG this month and next due to falling production from Reliance's 27m t/y Jamnagar refinery.

PETROWATCH learns alarm bells began ringing within the oil companies late last month when a pattern emerged of falling Jamnagar production from July onwards. It emerges that the Industry Logistics Plan coordinator Indian Oil wrote to the oil ministry in August that, "production from Jamnagar since July is not in line with the projected production numbers." For instance, while Reliance was supposed to produce 214,000 tonnes in July, actual production was only 206,000 tonnes - a deficit of 8,000 tonnes.

Matters did not improve in August. Against the target of 214,000 tonnes, Jamnagar produced only about 202,000 tonnes.

This is likely to continue into this month and the next as well. Reliance, it emerges, has informed PSUs that Jamnagar LPG production in September will be only 205,000 tonnes - 5,000 tonnes lower than the target of 210,000 tonnes.

As for October, actual production is likely to be 211,000 tonnes - 6,000 tonnes below the target of 217,000 tonnes. Lower LPG production at Jamnagar, we are told, has led to falling national inventory levels of this product.

"Inventory levels have fallen sharply," says a source. While current storage capacity is 392,000 tonnes, only 260,000 tonnes LPG is stored in tanks across the country.

The situation is causing concern as LPG is largely used as domestic cooking fuel and demand figures are rising. Falling inventory levels could affect supply to households and even to the automobile sector where oil PSUs - in response to courts cracking down on pollution caused by petrol and diesel - are trying to promote LPG as an alternative vehicle fuel.

The only solution is to boost imports. "We need to increase imports in this month and the next to top up the tanks," says an oil PSU source.

"This will have to be in addition to imports already planned considering the original production numbers from the LPG producers when the national industry production plans were drawn up (for 2003-04)."