Eating into IOC's southern market for petro-products

Vol 6, PW 10 (17 Jul 02) Midstream & Downstream

With controlled pricing history, India's domestic crude oil refineries are learning how to operate in a deregulated environment by snatching markets from each other! Allies of any kind are welcome, including state pipeline company Petronet-India.

These days officials at Hindustan Petroleum, Mangalore Refineries and Petronet-India are busy in joint meetings to reach an "attractive" tariff for the upcoming 361-km long Mangalore-Hassan-Bangalore petroleum products pipeline built at a cost of Rs675cr ($140m). In four months the pipeline will be operational and MRPL can then pump its products into Bangalore, which has an annual demand of 1m t/y.

For now Bangalores demandis met entirely by IOC's Chennai Refinery. That might change! We learn HPCL has joined MRPL to implement a two point strategy to force IOC into a corner: slash product prices so that IOC's Chennai refinery can not compete and reserve use of the pipeline for itself so that nobody can supply Bangalore - the largest single market in its home state Karnataka.

MRPL is confident its products will be Rs300 per tonne ($6.25 per tonne) cheaper than products from Chennai due to savings in inter-state taxes and excise duty. "This is a big saving to the customer and cannot be matched by Chennai," we are told.

"In these days of free market operations every rupee counts." Petronet-India is happy to oblige with an "attractive" transportation tariff.Chennai Refinery meanwhile, will be left with surplus products and no market.